All Forum Posts by: Chris Rodriguez

The end goal of course is to build that beautiful portfolio of holds, but not every investment will qualify.

My new clients, I put them in three small deals that need just cosmetic rehabs and have timelines under 6 weeks.  I have them flip them.  This does a few things, one it makes them some profits which they can use for more deals and two it gives them experience which makes financing easier and more beneficial.

The mid grade SFHs are good flips, the 2 - 4 units are the solid holds, or the SFH in B+ or better neighborhoods. But you really should be doing both at the same time if you want to be a full time investor.

I had a friend who attended one of those RE seminars that cost like 10k, they said that you should flip 3 for every hold.

You should set your parameters for what makes a good hold. The LTR loans are done through the DSCR analysis which compares your rent collection to your mortgage payment. The minimum ratio is 1.1 : 1. You need to collect 1,100 in rent for every 1,000 in your payment. I don't think anything is worth holding unless you are north of 1.3 DSCR and really near 1.5.

@Chris Rodriguez

I don't know anything about the Tampa market. I think it would depend on the properties you're looking at. I'm in San Francisco Bay Area and most people are flipping here in California now. It's negative cash flow for rentals here unless someone bought a while ago.

Example in San Diego, buy for $550,000, renovation about $75,000. Sell for $800,000 to $850,000 (someone else's flip)

I would flip in California but it's risky, don't want to get stuck with a house I'm trying to rent out that won't even cover my high mortgage payment. I have 4 long term rentals and was trying to build capital by attempting my first flip, made an offer on Indianapolis SFH. Great location with other flips in the area. Seller wouldn't accept less than their high list price. That wasn't going to work for me - being cautious since it was a major rehab $80,000+. I was going to do a Hard Money Loan with some of my own cash in for the Gap Loan amount. There are closing costs and holding costs (insurance for vacant property, electricity, water) and high interest (10% to 13% HML) or private lender, unless you're paying cash. Then the re-sale with agent commission with closing costs after the renovation. That added up so I walked away. Some investors use 10% as minimum profit margin, which is what I used.

Maybe talk to experienced investors in the area you're trying to flip and get their feedback if you have properties in mind and have them help you run numbers with an exit strategy if you had to hold it as a rental. Happy investing!

@Chris Rodriguez

Well, it goes to what is your "investment" strategy and goals.  Sounds you don't want to be a landlord.  So, looks like you will be flipping, and will be an "unintentional" landlord if a flip goes a little south..  Renting out a flip is a common back up plan to a flip...

Just remember that flip income is tax differently than rental income and property gains.  Flipping is considered "dealing in inventory" by the IRS so you are generating active income subject to self-employment tax.  If you sell an investment property, its long term capital gains...  But, at least if you flip you won't be a landlord which is what you stated you wanted to stay away from.  Also, the active income lets you put money away into a tax deferred account such as a self-employed 401k.

Make sense?  Happy to chat if you like.  Take care.

Typically when getting started, flipping is used to build capital, where as Brrrr is used to build a portfolio since your not selling the property. I personally don't care for the idea of flipping because now you take your profit with a big tax bill or you have to 1031 into a new deal in a short period of time. Whereas Brrrr allows you to cash-out-refi without getting taxed so you can do another but the best part is you still have the house that's cashflowing and an appreciating asset that you can consistently pull money out every so many years. Only reason I personally would flip it after the rehab is if the numbers make sense too or if it was causing to many problems. It really comes down to personal preference, but at the end of the day your taking a risk with RE either way so if you have the time and will power id say Brrrr, unless your hard-pressed for cash.