Option 1 vs Option 2: Here's my situation!

[Kevin Medina]

Hi everybody, I'm just getting into my first real estate venture and I could use a little guidance. Here is my situation:

1. I'm 26 years old with a steady job as an accountant.
2. I have a trusted real estate agent who has been a family friend for 20+ years. 
3. I have been approved for a $200,000 loan with a 20% down payment. Might consider FHA loan
4. Agent has set me up with FLEXMLS to get access to new listings.
5. The target area is Wellington, Florida. 

Option 1: The buy, hold, and rent strategy for 2 years. Benefit: under IRS regulations I can claim 0% capital gains on a principal residence if said property is less than $250,000 and I have lived in it for at least 6 months out the year). The option to rent to a premier equestrian or polo player at a premium price for the winter equestrian season presents itself. This season lasts 5 months out of the year and attracts many top riders from New York. This strategy is common for Wellington, Florida. 
         Thoughts: This strategy works successfully only if I can cover my expenses by half year leasing during the WEF season and if I can hold on for two years in order to qualify for the 0% capital gains tax.  

Option 2: The buy low and flip strategy. Sell for profit as fast as possible. 
         Thoughts: This strategy works successfully only if I can find a reliable/ dependable sub-contractor and can sell soon after i put the house back on the market. 

[Wayne Brooks]

Well of course, $250k or so puts you below the median euestrian area house, but that's okay.  Furnished, maybe $15-20k for the season, with rental commissions and 10% sales tax on the rental.  But of course, be careful with the section 121 qualifications, as you'd also be reporting rental income from that same property. The rule is it being your "primary residence" which is different than simply spending over 183 days there, I believe.  Not sure where the traps are with that.  You'd lose the first 9-10% in appreciation to closing costs, so if you're banking on appreciation I'd plan on more than a two year holding period.  Another consideration is make sure you're not violating your owner occupant loan requirements, since you wouldn't be living there the first full year.

As for the flipping option, there are plenty of cash heavy rehabbers working the Welly market, so that would be tough to compete with.