How would you invest $500k to start flipping?

[Adrienne Binder]

I inherited a property that is in the process of being sold. Once the deal closes at the end of the month I am looking at paying off all debt and have the opportunity to continue investing in real estate in the sum of about $500k. My wife and I have a couple of rental homes which cash flow nicely. One of them is paid off and the other has a balance of about $60k. Other than our rental homes we are total novices in terms of flipping, wholesaling ect. but have read a few books, watched some YouTube videos and read a lot on this site. I guess I’m just trying to figure out the best approach to grow a business that will allow me to retire in about 10 years. With our personal home (paid off) our two rentals (valued at about $350k for both) and this lump sump- we hope to cash in our chips and live overseas and I’m seeking strategies on the best route to do that.

Would you buy a couple more rentals in cash and put 20% down on another and let the extra cash flow pay it off and then maybe get another in a few years?

Is it smarter to buy a couple wholesale, flip and then rent?

Is wholesaling where it’s at?

There is a realtor that works with a contractor that I met recently that could help us potentially flip to sell?

Where would you start to grow a business that you could liquidate in 10 years if you had $500k?

Thanks for any input and advice!

[Randall Alan]

If cash is tight (even with $500k), financing your rentals will always make you more money than paying fewer off in full.  Run the numbers on using $200,000 on buying 1 property outright, versus 5 down payments of $40,000.  Leverage is power.  We have 24 rentals (40 units).  We see rentals as the bread and butter, and the flips as the gravy on top.  Just be sure to account for taxes / capital gains up front when you sell your flips.  
We’ve done 4 flips… biggest lesson so far:  cosmetic flips are where it’s at.  Don’t bite off more than you can chew.  We took on a 1925 house that has taken 4 times longer than a cosmetic flip that we will make the same amount of money in the end.  

Wholesaling isn’t our gig… but we will buy from a wholesaler.  It’s probably more about your skill set though.  You deal with a lot of crappy situations on either end of wholesale deals…. Divorces, death, bankruptcies … and usually the person selling their house is losing out, while you gain.  it takes the right person to say, ‘that’s what I want to do every day!”

We have been impressed with the appreciation in our portfolio over the past 3 years.  We have some properties that we have sold for 2.5 times their purchase price in less than 2 years… like buy for $55,000, put $10,000 into the unit, and sold the property for $160,000 two years later!  You can’t predict the future, but having a fleet of rentals has allowed us to sell a few off for some great profits! 

All the best!

Randy