buy and hold / flipping or wholesaling

[Michael Seutin]

On this thread I would like to know the opinions of professionals if a beginner or an investor with a few years experience wanting to make a living from real estate would be better off putting all of his energy into
- Buy and hold for rental income, or
- Wholesale properties, or
- Flip properties, or
a combo of each which would make someone probably less knowledgable in any one area.

[Ryan Webber]

The knowledge required to profitably run a rental/wholesale/rehab business isn't really that exhaustive. Much of the knowledge for one carries over to another.

Wholesaling is all about finding and analyzing deals and building a buyers list. Rehabbing is all about finding and analyzing deals AND getting the work done efficiently. Rentals are about finding and analyzing deals, getting the work done efficiently, and dealing with tenant management.

I do all three. Wholesaling easily feeds into rehabbing or renting, because you can find great deals for yourself to rehab or rent while you wholesale. Rehabbing feeds into rentals because a make ready on a rental is a piece of cake for a good rehab contractor.

I would say there are multiple components to analyze to determine which single or combination is a good fit for you. Time, money, credit, and goals are the main components to look at.

Wholesaling and rehabbing are ways to generate capital, while rentals are a good way to invest capital. Wholesaling requires very little starting capital while rehabbing usually requires fix up costs and/or closing costs and down payment. Rentals normally are going to require at least a down payment and closing costs but not always, and they may need to be fixed up, also.

Wholesaling and rehabbing are time and skill intensive, while rentals are by nature passive and can be delegated out very easily.

If your credit is in the toilet, building an extensive rental portfolio may be out of the question right now. Wholesaling requires no credit and rehabbing can require little or no credit.

Your investment goals can range from you need to make $2,000 in the next month because you are broke and unemployed or you make six figures at your job and are looking for a safe place to make 15% on your money.

The answers to all these questions are what determine which is better for you.

If you have $25,000 and you invest in a rental property that will cash flow $10,000 a year then that's great, but you have to wait 2 and a half years to be able to invest in another. During that two and a half years you could have taken that $25,000 and done a rehab to retail and then another and then another until you were doing 1 a month. Let's say you profited roughly $15,000 per rehab and over 2 and a half years you amassed $250,000. At that point you could invest that money into 10 rentals at the same return and make $100,000 a year.

But if you are a doctor or an engineer making $200,000 at your J-O-B, it might be a waste of your time to do rehabs and you would rather just invest your 401K of $250,000 through a self-directed IRA straight into rental property.

Or maybe you are a complete poindexter and you wouldn't know the first thing about swinging a hammer and you still don't have any money or credit, you could start off with wholesaling. Over 2 and a half years you could amass let's say $100,000 and start investing some in rentals, and maybe you've developed some contacts that can take care of the remodeling for you so you start doing some rehabs, too.

Point being, there are multiple ways to make it in real estate, and it depends on your time, money, credit, and goals.

Let me KISS it:

Wholesaling requires time
Rehabbing requires time and money
Rentals require money

There are exceptions and caveats but that's the basics.