Brrrr and refinance or fix and flip

[Nathan Johnson]

Alright folks! I wanted to pick some of your experienced brains as far as my next step. Last year my wife and I purchased a tax default SFH for 75K in our hometown, put 45k into it and sold for 174k It worked out pretty good for our first deal. I did most/all of the work and I learned a great deal about what to sub out and what to tackle myself.

I also learned that flips are time consuming and don't build long term wealth. I've been looking into some properties to BRRRR, but I'm nervous about being a landlord.

We have about 100k in an equity line on our current home that we're willing to use to finance things.  What are your thoughts on the best avenue to venture down using that 100k   I think I have a pretty good idea already, but I really wanted to hear your thoughts.

Thanks in advance.

[Steve K.]

@Nathan Johnson , I was doing major rehab flips (part-time).....about 1 per year, but large projects. Then an acquaintance told me (18 months ago) about BRRRR rental strategy. How he took $80k and (via BRRRR and some creative financing in part) acquired 30 rentals in 5 years in Denver. He now has $8M in property, ($5M in loans, but $3M in equity). Granted, his timing was right and Denver appreciation worked in his favor, but the acquire and rehab a "flip" type property for about 70-75% of ARV, then cash out refi for 75% of ARV, means he has none of his original cash tied up.

I am now a reluctant land lord.....I use a PM, or otherwise I couldn't do it part-time with my other career. I close on doors #5 and 6 in 10 days. I like the fix/hold strategy a bunch. In Denver, I want to own/control the real estate that's appreciating very well, and I cash flow, and the tenant pays off the mortgage over 30 years. Plus, my "flip" type profit of around 30% is all I have invested in the property.....and by holding, it's not taxable today (but deferred until I sell).

Fix/flip is taxed immediately as ordinary income. Holding is more tax efficient, if it works for you.