I鈥檓 interested in getting my first Flip property. Getting started which would be better long term and short term, Flipping properties or investment properties ?
Real Estate Agent 路 Chicagoland 路 Member since 2018 路 314 posts 路 199 votes
5y
This doesn't have to be an either or. In fact, I think the best strategy is to flip a property into an investment. You save money on the purchase price, learn the tricks of the building, and hopefully rent it out for more. If you can refinance and get your money back out, you can do it all over again.
Flipping requires a lot more work, time and money up front. There is also a lot more risk. If you've never done a major reno, I'd buy an investment property first. Get one that need a bit of work (not talking about ripping out kitchens or knocking down walls) and see how you do with a small project first. Then rent it out and decide what your next one will be.
If you are in an area where the market is hot right now, it may also be a bad time to buy a place to flip as you will be paying more and people may not value the upgrades as much.
Real Estate Agent 路 Chicagoland 路 Member since 2018 路 314 posts 路 199 votes
5y
This doesn't have to be an either or. In fact, I think the best strategy is to flip a property into an investment. You save money on the purchase price, learn the tricks of the building, and hopefully rent it out for more. If you can refinance and get your money back out, you can do it all over again.
First, you don't "flip houses", you flip "cash". REI is nothing more than your cash getting from one place to another. The "one place" is your starting point, and the "another" is your ultimate destination. The way you get their is by riding a series of properties...much like buses. Think of your "houses" like buses for your cash to ride, transferring from one bus to the next, until you get to your final destination. Your cash rides the first bus, then transfers to the next, and the next and so on, while your money makes friends with every ride.
Ride just one bus, and that bus route has a limit to how far it will take you...then you start walking, meeting fewer friends as you go,...if any. Not only are there fewer friends this way, but it takes much longer to get to where you want to go.
Trying to ride just one bus, and expecting to get to that magical destination, is hard and expensive...and you as you notice all those other buses that pass you as you walk, you start rationalizing that they are too expensive to ride, and they all are probably going to the wrong destinations,...even the ones that are clearly marked that are going to where you want to go.
Second, the answer to your main question, is "both".
Investor 路 Philadelphia, PA 路 Member since 2016 路 13 posts 路 11 votes
5y
@Trevon Jennings this really comes down to what your personal goals are. Flipping is a short term way to make money (if you do it right) with no tax advantages. Buying rental properties is a way to build long term wealth with great tax advantages.
Real Estate Investor 路 Matthews, NC 路 Member since 2017 路 219 posts 路 173 votes
5y
@Scott Cheek hit the nail on the head. Once you stop flipping the income stops. But there is no reason you can't do both. Flips bring in quick cash. Rentals create long term wealth. Flip single family to get cash to buy multi-family. I don't like ot hold single family. When someone moves out you may be stuck coming out of pocket for a month or 2 until you get a qualified renter back in. With a duplex you should be able to cover at least part if not all of the mortgage and not get burned too bad. And don't be too concerned about the crazy market. Do your analysis. Use the BP calculators to be sure you will make money, either when you flip or from the rents. You should always have more than 1 exist strategy. And buying a multi-family that's in distress means you end up keeping more of the monthly income. Right now property owners think their property's are made of gold so you will most likely be doing some sort of reno on a distressed property no matter which route you take.
First, you don't "flip houses", you flip "cash". REI is nothing more than your cash getting from one place to another. The "one place" is your starting point, and the "another" is your ultimate destination. The way you get their is by riding a series of properties...much like buses. Think of your "houses" like buses for your cash to ride, transferring from one bus to the next, until you get to your final destination. Your cash rides the first bus, then transfers to the next, and the next and so on, while your money makes friends with every ride.
Ride just one bus, and that bus route has a limit to how far it will take you...then you start walking, meeting fewer friends as you go,...if any. Not only are there fewer friends this way, but it takes much longer to get to where you want to go.
Perfect analogy to share aweeome wisdom, Joe.
Market, neighborhood, cycle phase, asset type and class etc determine whether to flip or hold or assign or SF or LO. But holding has been best for me. Transaction costs and taxes are too high to trade RE as inventory. Not to mention risk and work.
Use all niches to create friends or riches as your cash rides on different buses馃憤
Real Estate Agent 路 Chicago, IL 路 Member since 2017 路 2k+ posts 路 2k+ votes
5y
If you are in a hot market flipping is very hard. It can be done but super competitive and lots of people aren't successful (you don't hear about them on BP haha). Buy and hold is safe and very easy to do successfully. I see a lot of my buy/hold clients end up flipping the property a few years later for six figure profits as the market goes up and they get long term cap gains. You can still rehab buy/hold to create value.
Contractor/Investor/Consultant 路 San Diego / Phoenix 路 Member since 2021 路 12k+ posts 路 15k+ votes
5y
Also note: if you are going to be a flipper you need cash and knowledge. And then you can still lose money, even if you have unlimited amounts of both. Ask me how I know.........