Flip or Turnkey in Chicago?

Question

Hi,

$50k, what would you do as a first time REI? Should I start building capital through flipping & learn the innerworkings or buy something ready to cashflow?

1) Buy wholesale. Find a loan. Find a team of contractors to rehab. Find an agent to sell it.

2) Buy Turnkey. 2 Flat in Chicago. 15%-20% cash on cash.

Trying to put together a team to figure out both.

Thoughts? Any help would be greatly appreciated!

Jovim

Crystal Smith · Answer

W/ $50k you do the following:

• Get pre approved for 2 types of loans; one to hold properties;  the other to purchase renovate and flip.  The objective:  using leverage or other people's $ will conserve your cash and allow you to do more deals
• Establish a relationship w/ wholesalers and a realtor to find deals.  Agents can help you w/ off market Deals as well, if you treat them right.  The good wholesaler or agent will also have access to a network, including GCs to support a renovation
• W/ loan pre approvals in hand you'll be positioned for both the buy and hold along w/ opportunities to flip.

$50k is enough to get started but you need to understand how to leverage.  Even if you purchased something "turn key"  it will probably be more than $50k, so prepare yourself now for the future

Scot Howat · Answer

If you want to lose your $50k then I'd flip.  Chances of being successful are pretty slim right out of the gate.  You have to really be committed to learning the craft if you want to flip.  They say a successful 2nd flip just means that you lost less money than on your first.  Each time you'll lose less and less, and eventually you'll learn how to make money.

If it's your 1st deal, then I'd go for a rental.  Turnkey rental would be good, but you still have to know the area you're buying in.  The ROI % is just a number on paper. Your actual ROI will be determined by how good of a landlord you are.

Account Closed · Answer

@Crystal Smith is right on!

Ali Boone · Answer

COMPLETELY different levels of effort and risk. Where do you fall in interest levels in both those categories?

Iwetta Bobka · Answer

Hi Jovim,

Go out there and see what kind of deals you can find. Look around and then evaluate potential property.  There might be deals that will work for flipping and at the same time will make good cash flow if rented. If you decide to sell property and you have hard time finding buyer then you can rent and hold until your ready to list it again.

Bob Ewoldt · Answer

I think it depends on your desired level of involvement. Flips are going to take more of your time, and will probably be harder to find right now in Chicago (not impossible, though). If it were me, I would probably find a good small multi to buy and hold.

Dillon Bell · Answer

@Jovim Ventura

It’s a great question. It all depends on the time you are willing to commit to your investment. If you are willing to give it your full time and effort, you can be very successful with the fix and flip strategy. Obviously experience/relationships also go a long way. For example, how do you plan on finding (quality) deals? How will you find a good contractor? (typically the hardest part of all) Are you going to be watching over the job? These concerns all make the process very time consuming. While time consuming, if you have experience/relationships and enough time to manage the deal all the way through, you can make a lot more (quick) money than going the turn-key route. It’s a great short term play but typically includes a lot of “sweat equity.”

If you have a full time job and a family or just prefer a more passive approach, the turn-key route may be better suited for you. Most people would rather spend time with their family than driving to their project everyday. In most cases, the turn-key strategy also has a lower barrier to entry.($)  The main argument against Turn-key is that you can find better deals on your own. And it’s true! It comes down to how you value your time. Is having your time back worth the 10-20k premium you pay? Many think so. You should definitely do your homework on the turn-key provider. Correctly vetting the provider is CRUCIAL. With a great provider, you can sit back and collect the checks. Its definitely a longer term play and all about cash flow.

Message me if you have any other questions. My company owns a large portfolio of Chicago rentals and love the returns. We’ve also flipped a few hundred homes in the last year or so. If it were my 50k, I’d find a good tk provider and see if I could lock up two cash flowing rentals.

Nino Alfano · Answer

what @Crystal Smith said.

2 types of loans and find a good wholesaler and realtor!

I am a contractor and that's where I am. FHA and  conv loan.

I have my live in 90 days FHA 203k (me being the contractor) going under contract and conv loan sing used for strictly flips.

Plus being the contractor saves a lot of time. When I walk into a property I immediately know how much it is going to cost me.

Jack Edgar jr · Answer

Jovim,

It sounds like you have narrowed your choices down to a couple investment options. Now comes the point of understanding your needs and expectations to decide what works best for you. Both options are great but from my experience it comes down to where your at in your life, time, money, comittement.

Example: when buying our first investment property, we had to ask ourselves several questions to ultimately buy, renovate, rent out, and hold. Some of the key elements to determining our stategy included: the type of property we wanted to buy, amount of time commitment we had to work on the investment, level of risk involved and amount of money we had at stake ie return on investment expectations compared to other options (risk vs reward), skill set including knowledge of market as well as comfort with the team we had assembled, and return seen in both scenarios.

This is just a board view, and apologize for not being more detailed. (Typing on a phone that keeps freezing up) I hope this helps. Pm me if you would like to discuss the 2flat purchase cashflow project.

Best,

Jack

Flip or Turnkey in Chicago?

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