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Getting Started in RE investing: Rent or Flip? Sell?

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Frequent Contributor

Getting Started in RE investing: Rent or Flip? Sell?

Hey Folks

 

I am beginning to plan my entrance into RE investing and am curious of the thoughts of those with experience in the topic. I've been doing a bunch of research over the years so now I'm curious to hear it from real people.

 

Don't have cash flowing out of my nose but enough for a small down payment, probably (hopefully) won't be in my current city longer than 2-3 more years assuming things stay relatively stable, approx 6 fig income. I thoroughly enjoy the RE industry as well ( tho that fact may be immaterial).

 

First: rental or flips? I grew up flipping with my parents but I am no where near as handy as my father and don't have the time to devote to working myself, which I know is where one makes the real cash. BUT I may not have enough cash for a 20% down either, tho I do have access to VA loans. 

 

2nd: Living in a market that is really hot at the moment, homes on the market less than a week. I want to sell to pocket some capital but that would mean I would need to buy high too which totally defeats the purpose. Buy high, rent, then hope for low? Doesnt make sense either

 

No real interest in REITs.

 

TIA!

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Established Contributor

Re: Getting Started in RE investing: Rent or Flip? Sell?

Why don't you invest on a property with your parents and learn the ins and out from them first hand (rather than asking some randos online)?  You can take a smaller portion of the profit since you're not putting in sweat equity (and likely not as much $ either), but you'll be making money while you learn.

 

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Senior Contributor

Re: Getting Started in RE investing: Rent or Flip? Sell?

Getting into property sure, though probably only for sitting on for a spell. I wouldn't take the gamble of buying to rent ATM with things so uncertain, your renter could lose their job a week after renting and then you're stuck?

 

Flipping might be the better choice, but you have to have a very quick turnaround to turn a profit. Especially if using subcontractors that eat into those profits. Houses requiring only makeup are a better option versus gutting etc. Way too many unforseen problms always pop up.






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Re: Getting Started in RE investing: Rent or Flip? Sell?


@Janus wrote:

Getting into property sure, though probably only for sitting on for a spell. I wouldn't take the gamble of buying to rent ATM with things so uncertain, your renter could lose their job a week after renting and then you're stuck?

 

Flipping might be the better choice, but you have to have a very quick turnaround to turn a profit. Especially if using subcontractors that eat into those profits. Houses requiring only makeup are a better option versus gutting etc. Way too many unforseen problms always pop up.


Good call on the rental in COVID times. That slipped my mind. 

I'll need to run the numbers but if its just a paint job and maybe some new appliances (not interested in total guts this early) I can do most of that myself but I'm not sure if the margin will be there to even make it worth it. You're right, its better option if its worth it.

 

Thanks @Janus  

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Re: Getting Started in RE investing: Rent or Flip? Sell?


@CBartowski wrote:

@Janus wrote:

Getting into property sure, though probably only for sitting on for a spell. I wouldn't take the gamble of buying to rent ATM with things so uncertain, your renter could lose their job a week after renting and then you're stuck?

 

Flipping might be the better choice, but you have to have a very quick turnaround to turn a profit. Especially if using subcontractors that eat into those profits. Houses requiring only makeup are a better option versus gutting etc. Way too many unforseen problms always pop up.


Good call on the rental in COVID times. That slipped my mind. 


A lot of places have eviction moratoriums so you could be stuck for months with a non paying tenant. The opinions on where the housing market are going are all over the map too. Prices could stay stable, or we might be in for a drop in house prices over the next year or so. In the latter case, if you want to sell off rentals when you move, you might lose a lot there.

 

I don't know much about flipping other that what I see on tv shows, but the folks making money on those shows are not paying retail for the renovations. It seems you either need to do a lot of work yourself, or a contractor with hiring subs at rates they charge builders vs. what they charge homeowners.

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Re: Getting Started in RE investing: Rent or Flip? Sell?

I'd also mention that with how the market is and houses not staying listed very long, it doesn't give you much haggle room for the best price when it comes to getting properties only needing cosmetic improvements. Your higher profit margin will usually come from major renovating where you can get it for lower due to the state of the dwelling being unattractive to buyers. 

 

That said you'd be amazed at what a simple coat of fresh piant new flooring appliances and deco can do to shine a place up. If you're going to tackle renovating it's probably best to stay away from places that need major upgrading such as electrical, plumbing and structural. 

I definitely wouldn't use the shows on HGTV as a guide on how glorious and profitable it can be, there's a lot of "scripting" that goes into those shows. Most of those people were doing it "real world" for years before being TV stars.

 

It can be done though with enough research for your area and tackling the right first job. 






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Re: Getting Started in RE investing: Rent or Flip? Sell?

So big red flag

 


@CBartowski wrote:

 

.....BUT I may not have enough cash for a 20% down either, tho I do have access to VA loans......

 


 Every flip-type loan I know of requires at least 20% down (most want 25%)

You can't use VA on a non-owner occupied property. 

 

I would suggest looking into house hacking if you lack 20% down 

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Re: Getting Started in RE investing: Rent or Flip? Sell?


@dragontears wrote:

So big red flag

 


@CBartowski wrote:

 

.....BUT I may not have enough cash for a 20% down either, tho I do have access to VA loans......

 


 Every flip-type loan I know of requires at least 20% down (most want 25%)

You can't use VA on a non-owner occupied property. 

 

I would suggest looking into house hacking if you lack 20% down 


I forgot about house hacking. Not a lot of multi family out here but that's a good thought thanks!

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Re: Getting Started in RE investing: Rent or Flip? Sell?

Find a real estate agent who can help you find a first home.  Give him your wish list and see if him and his contacts can find a home for you.  I have been flipping for about 7 years and this is a BIZZARE time.  We camt buy at the foreclosure auction because the rent moratorium includes foreclosures.  I cant buy on the open market.  We have a lot of hedge funds purchasing homes to hold.  They pay a pretty penny because they rent out and work on very slim margins.  Its hard times in my area.  However, there are apartments going up around me at incredible rates for the past years.  Including 1000 people a week moving to the state.  Multi family is the place to be in my area. 

 

Get in touch with an agent who knows the area and can lay down all the info you need to make an informed decision.  You can lose your a$$ real fast in this market.  

 

There was a guy on here who had some real nice formulas for renting or selling that I still use.  I will look up his name and add it as soon as I find it.  


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Re: Getting Started in RE investing: Rent or Flip? Sell?

ABCD2199.  Plenty of good info on real estate.  Not sure where he went.  I have picked up some invaluable nuggets from him.   


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