How to decide whether to Fix and Flip or Buy and Hold? Atlanta

Question

I would like to know how the characteristics and elements of a property that investors look at before deciding to Fix and Flip or Buy and Hold?
Also, for the Atlanta investors out there, do you notice the real estate investors within your network investing in one strategy over the other? If so, which and why?
Thank you all!

Frank Wong · Answer

Hi Megan,First, it depends on the individual's investment strategy which they must identify. I look at the property type and price point. If the home fits my criteria for a rental property I will keep it. An example will be renting the lowest price home in the neighborhood. On the flip side if I had a high priced home that I could fix and sell that doesn't fit my rental strategy I would sell it. I like starter homes for rentals because I can grab a larger pool of renters. If I tried to rent out a 2200 sqft house as a rental my ROI would be horrible. Some people rent out 2200sqft houses and there is nothing wrong with that. Just doesn't fit my investment strategy.

Kevin Dougherty · Answer

We fix and flip in areas where homes are selling daily, weekly and monthly. Worst house in good neighborhoods. A good realtor can help you with this because it takes good metrics to make money in fix and flips and not loose your shirt. The realtor can help you with property comparables, days on market, how much available inventory in your market (your competition), how much to to improve your target property (you don't want $1000 faucets in a home where the other homes that were recently rehabbed and have recently sold had $300 faucets, etc...). A good realtor knows what is working in their markets and what is not so you should have one on your team as a trusted advisor.Buy and holds are a whole different dynamic, every investor has their own tolerance for what they want in buy and holds... some like cheaper property that have good cash flow today and do not appreciate that much over time and others are willing to accept less cash flow today from more expensive property but theses homes appreciate more over time. Some like 2 bedrooms properties because it will have less people living in the property and hopefully less wear and tear and others like 4-5 bedroom properties because they will collect more monthly rent (hopefully).

Megan Elise McIlvaine · Answer

@Minou Pak Well, it made it easier to read so there's that! Thank you for your honesty and advice. I don't currently have the capital so I'm spending my time educating myself and saving every dime and investing what I save to multiply it. I have the same anxiety towards risk that I think you're having and I've noticed that sometimes it helps to step out of yourself when analyzing a deal and pretend that you are coaching either a new investor or your past self through the process. You'll often find that you know a lot more then you thought you did and that a good deal is indeed a good deal if the math was done correctly. I really encourage you to have faith in your abilities and if you find areas you'd like to improve in then pursue guidance but I'm excited for your first deal, don't let yourself keep you from making the future you want!

Minou P. · Answer

Wow. My reply looks awful... The mobile app doesn't allow for paragraphs I guess?

Minou P. · Answer

@Megan Elise McIlvaine Hi Megan, I'm a beginner investor and I will say that picking personal strategy is where I'm struggling a little bit at the moment. This is what I've learned so far: there is no definite answer because it all depends on the market (this seems to be a pretty common answer in REI). But the simple math is that closer to retail you pay, the chances are the longer your capital is tied up to the property. Call me a chicken, but I'll share that even when I currently have the capital to try things like buying with cash to BRRR or fix/flip, its honestly hard for me due to different variables in my personal life. However, if I didn't really have anything to lose, I would be trying ANY method/strategy to start and see where it goes. For now, I'm focused on building relationships with real estate agents, lenders, etc so I can enlist their expertise when I am ready. I think Ive already missed a few good deals, but I'm not kicking myself too hard yet... Good luck! Hopefully you'll find what your looking for going into 2019.

Frank Wong · Answer

Hi Megan,Yes, that is pretty much my deciding factor for keeping it as a rental or flipping the house. I always ask myself the question once I am done with the rehab of each project. Would I buy this house at my current asking price as a rental? If it's a yes, I keep it and if it's a no I sell it.

Megan Elise McIlvaine · Answer

@Kevin Dougherty, Thank you for breaking all that down for me. The whole thing makes much more sense now.@Frank Wong, I agree, investment strategies are very tailored for each individual investor. From what I gathered your strategy is, a cheap house for a good deal is turned into a rental and an expensive house for a good deal is fixed up and flipped?