Pop Top on First Flip?

[Gregory J.]

I am actively searching for my first deal for a flip and I feel split between two schools of thought that I have heard through various BiggerPockets resources:

School 1: get a property at a great discount and have a thorough understanding of rehab costs and ARV so you can ensure you make a profit and mitigate your risk. Generally flips stick close to the existing floorplan while renovating all the cosmetic kitchen and bath stuff.

School 2: location, location, location. House is either a tear down or gut rehab, generally in a highly desirable area. Investors can afford to buy at retail price because they aren't at their "highest and best" use. Investors tend to add sq footage, add a second story, add accessory dwellings, or subdivide existing lots to tap new value.

In my market the best deals I see are on single story ranch homes of 1200-1600 sq ft in size. My market supports new 2500-3000 sq ft homes at $150-$200 per square foot which tells me I could pay a premium for the 1200 square foot ranch that is functionally obsolete and turn a profit by adding a second story. 

My instincts stay start with what is safe and expand on what I understand. Start with the small ranch rehab. as I get experience, get a little more creative. Do the first deal with the current floorplan. Do my next deals with reasonable additions. Learn what goes into it until the pop top isn't so scary.