House flipping was dumb, until I flipped my first one!

[Miles Goodwin]

I have never liked the Idea of house flipping even though it has become a trendy buzzword when talking about real estate. I personally prefer the buy-and-hold method, specifically the BRRRR process. I believe the buy and hold, has a lot more benefits and fits my goals a lot more than flipping. I own a construction company and work full-time in the business while investing on the side. To me, flipping becomes another full-time business, which I wanted to avoid. Buy and hold requires a lot of time and energy when in the renovation process or filling a vacancy. Flipping seems very hands-on, being involved in the renovations and waiting for the listing to sell on the market. The idea of capital gains tax also has deterred me from flipping, but against my desire to avoid it, I ran into a deal that just made too much sense not to flip.

I purchased a house from a family remember back in September of 2022 for a below-market amount due to some work needing to be done. My plan was to complete a simple renovation, rent the house and refinance when I need to pull money out for the next house. I bought the house for 40k and only about 10k all in closing and renovations.  The house was located in a pretty rural area so I was unsure how easy it was going to fill with a tenant. After spending some time at the house renovating the property, I met a neighbor who I found out owned a lot of the houses locally and rented them all. After some talks, he showed interest in buying the house from me. I told him to make me an offer, fully expecting the offer to come in well under what I was willing to accept. He came back to me with an offer of 93k as is, I only owned the house for just over a month.  Being a numbers-oriented and bigger-picture kind of person, I knew the potential this property had long-term. But, 43k profit in about a month, I have never made that much money that easy. 

I am not saying I will now be a full-time house flipper but this deal has definitely opened my eyes to the potential. I honestly was very deterred by the thought of paying capital gains tax on something just for selling it for more than I bought it. After considering the offer I did end up selling it, it only made sense. I could walk away from the project with money to buy another deal closer to my other properties in an area I was more familiar with.  I knew the property finished would be worth the 110k area but would only be renting for around 800 a month. Not as high of a rent as I would have liked for the value of the home but not terrible in the same breath. The property was also located about 30 minutes from my house, I considered the drive any time there was an issue. After talking it over with my accountant and discussing the impacts of capital gains tax, I did sell the property. Officially being my very ever house flip, Likely not my last. 

The point of this post is to potentially info someone else who was closed-minded about house flipping like I was. I now see that it has its place in an investor's toolbox. It holds great value for certain deals and just wanted to provide an example of how it can be a great option in the right situation.