Do Flipper Rehabs leave reasonable deals for a buy and hold REI?

Question

It would seem that the REI Flipper would plan to reave a sale price that would work for a buy and hold REI.

Do any of you plan your rehab with this in mind?  If you knew you had a buyer at the end at some agreed to price, it would seem to be worth some discount for the buy and hold dude.

Another way of looking at my question would be are there any "partners" doing BRRRR deals in a tandem partnership?

J Scott · Answer

Those that do this are typically part of turn-key operations, focused on resale to buy-and-hold investors.  Otherwise, a rehabber is taking a significant risk by doing a rental-quality rehab -- if he can't sell to a landlord, he'll typically need to re-renovate to a higher level to get it sold retail.

David Faulkner · Answer

There's a real estate investment product designed for such people ... it is a REIT. To be a successful and active real estate investor (which is what you need to be in order to select and buy a single rental property and build a team to manage it) with reasonable risk, you will need to learn and be at least some what hands on at least in the beginning and that is not going to be passive. Real estate investment as most talk about it here on BP is really more akin to starting your own business than it is passive investing. Yes, if you are willing and able to do that then you can outperform a REIT, but if you are not willing to do that then you may have some expensive lessons before you. Those stating otherwise may be trying to sell you something. I honestly don't think this is the best path for you given your stated goals and expectations ...

David Faulkner · Answer

Why not buy it like a flipper, manage the rehab yourself, and put that forced appreciation equity bump straight into your own pocket before you hold as a rental? That would give you much superior returns over paying a bunch of middle men, you would also then be assured that the rehab was done up to you quality standards, and finally it would hedge your investment to a large degree from any short term pricing volatility caused by a recession or other events outside of your control.

Jay Hinrichs · Answer

I was going to mention Russ but he beat me to it.  Charleston is a tight market and few do this there compared to other markets were there maybe 5 to 10 turn key companies all working one market think Memphis for instance.. also those markets have far higher % of population renting SFR's than other markets were retail is so strong and Charleston and N. Charleston has a very robust retail market.

Jay Hinrichs · Answer

Buddy Holmes  I had that park in escrow but it just would not pencil.. My GC does an incredible job.

take a look at 62 poplar next time your going to Charleston we just put that into escrow at 555k  370 a sq ft which could be a record for that area.. or pretty close.

we love working there.. but 4  to 5 years ago when I started it was still totally under the radar.  good luck I bet you saw some nice little older bungalows that would make for nice rentals in that area as well.

Jay Hinrichs · Answer

Buddy Holmes  I think Boeing will fire back up they just got a massive contract on the stretch 787 10

which is built in your fair city... If I was 25 years younger you could call me neighbor I would move there in a heart beat as bigger cities go its a great city to work in.. permits dead cheap.. quick and you pretty much know where you stand once you know the rules.

those 7 lots I did on Oak and Buist I got them subdivided in a matter of 100 days or so.. that would have been 2 years and 50k in my market here in Portlandia.

Jay Hinrichs · Answer

Buddy Holmes  I am seeing some of my new construction there in Charleston being bought by investors and going right onto Airbnb..   if you go to the corner of Oak and Buist in N. Charleston you will see one of my projects there 5 new builds.. but on the same streets are some really nice older homes that would make great rentals.. you can look for one's that are run down or tired  knock on a few doors you might scare something up that way as well.. then if you continue down Oak to the east past crappy MHP you will see three more homes those were ours as well. the very next street hang a left.. there are older homes there that would make nice rentals.. you have a great opp in N> Charleston with Boing going gang busters its a hot place to be investing.. and TOTALLY under the radar so you don't have the intense competition you have in other markets from turn key companies.

David Dachtera · Answer

Buddy Holmes,

Some folks build in a below-market asking price. That should leave you room to have positive cash flow.

Others plan to ask near- or above-market on resale. It's going to depend a lot on the local market.

Buddy Holmes · Answer

@Jay Hinrichs,  I was able to drive buy your projects near Park Circle.  FYI, they are on Oakwood.  A nice area!   The ones on the other side of the MHP are a bit isolated but the "cluster of 3 looks good.  Who are your main end customers, young yuppie types?  There are several other really neat areas there.  The homes around the lake on Buist with the huge Oaks is very nice.

Cheers,

Buddy

Buddy Holmes · Answer

@David Faulkner, Thanks.

I do think your advise is correct for one just starting out.  And for in my start I did have some close calls.  One is sitting there in Orange County, but after 11 years it is close to even in cash flow and back a bit more than the start for appreciation but at least has helped in taxes and principal pay down.  I have 6 other SFR's that are doing well with cash flow and looking for one or two more for a 1031 this summer to combine with a DST (somewhat like your REIT suggestion) for the rest.

Thanks again,

Cheers,

Buddy

Do Flipper Rehabs leave reasonable deals for a buy and hold REI?

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