BiggerPockets

I am NOT an experienced investor however with current market conditions buy and hold is the way to go. Properties are pretty cheap these days and with all the forclosures out there people need a place to live, finding tenantes might be a bit easier. If you were to flip, financing is difficult for many to obtain therefore your house would take a lot longer to sell creating more carrying costs. Flipping is a gamble and takes a lot of hard work and knowledge. I'm not sure what your background is but get as much information as possible before you take the plunge.

Good Luck,
Heather

PS: Get to know your local market, things might be different for you. This is just a generalized statement based on what our country is going through currently.

Flipping, whether you mean fix and flip or wholesaling, is a real estate business. Buy and hold is real estate investing. The difference is that a business is an active pursuit. You do the business (or, have your employees/contractors do it), and you make money. Investment is more passive. If you hire out the management and maintenance, its nearly completely passive. You invest your money and (hopefully) get a return. The management and maintenance aspects of buy and hold are really businesses. Some investors choose to outsource that, others do it themselves.

It definitely depends on your local market. Houses are still selling across the country but what your local market is doing makes a huge difference. I think buying and renting is definitely a safer bet right now in most parts of the country, but that doesn't mean flipping is not still viable.

If you are looking to flip houses then you need to study up on how houses are selling or not selling in your market.

Don't just look at houses that have sold but look at the houses that haven't sold. Your "dud" ratio is what I call it. How many expired listings were there in that same time frame as your comps? What is your market's inventory (the total number of houses for sale for that month divided by the pending and sold listings for that month)? I like to see a dud ratio of less than 25%, and an inventory of 6 months or less.

You also need to understand the local economy. Is your local economy staying strong through these tough times or is it taking a hit or is it in freefall?

One more thing I would consider is the rate of foreclosures for your local market. An influx of REO's (Real Estate Owned - foreclosed houses that banks are reselling) can drastically decrease housing prices in an area.

Now if these factors are not what is desired, the key is to adjust your expected sell price.

Price overcomes all objections.

Even in some of the worst markets in the country, houses are still selling. Now they may be selling for pennies on the dollar, LITERALLY, but they are still selling.

If comps for the last 3 to 6 months on a house come in at $100,000, but 50% of listings expire, the housing inventory is at 9 months, and the local economy is stable with a slightly increased number of foreclosures then I would look at adjusting that ARV (After Repaired Value - what it will sell for all fixed up) down 5-10% to compensate. I would go back to my comps and see how my house would compare with the others sold if mine was selling at $90,000 or $95,000.

If your local economy is in free fall or foreclosures in your area have gone through the roof then you will need to adjust your ARV down even more. You might be looking at $80,000 to $85,000 or even less depending on the severity of your local market. The idea is to compare your projected ARV with what is currently selling on the market and to factor in local changes in supply and demand (as with increased foreclosures and/or dwindling economy) to get a conservative idea of what that house will sell for in the time you want to sell it in.

If houses are staying on the market for 9 months at what you are expecting to sell your house for, then knock 10% off and see how it compares now.

Point being, price overcomes all objections.

Chris C, if you're interested in flipping, you might want to follow this thread. Title seasoning is becoming an issue for both conforming and FHA loans.

http://www.biggerpockets.com/forums/92/topics/25417?page=2

While I'm extremely new to investing, I guess the answer would depend on what your goals are.

For us, we plan on buying and holding (renting). We hope to build our investment portfolio over the next 10 years with several properties. With the end goal being that when we retire we will have either A) Rental income streams and/or B) Property that will go back up to market value that we can sell.

I hope that our goals are realistic. I look at them in a modest way because I don't see it as a get rich quick plan, but rather to give us the ability to have a more financially comfortable retirement when the time comes.

Thanks for all the replies Rich that was kind of the plan i was going for i was thinking right along those lines just maybe a 15 year plan instead of the 20

What about a balance. Income now and wealth later?

Originally posted by Rich Weese

Raise your sights!! If you can buy 1 home a year for 20 years, you'll be able to retire and never work another day of your life. (based on following)
1. Buy at market value or less
2. Rent and when rents increase, use the amount to pay off loan in 20 years.
3. Leaving your investment program funds alone.
4. Never sell .Refi House # 1 in the 21st year..All proceeds are tax free.
5. We have some semblance of inflation to increase rents and values.

Opposing viewpoints are always welcome...

If loans are going to be paid off in 20 years, how does House #1 get refinanced in year 21, or am I missing something? Shouldn't refinancing be done based on interest rates?

Edit: I think you are saying to take a loan on the house in year 21 and use it to buy more real estate?

i've done the figures on both and I always come to the conclusion its better to rent. Of course sometimes it is better to sell, just need to look at what you want to accomplish.

Will- your previous 2 posts were very complimentary. Thank you. I'll add 1 thing to the retirement plan. NEVER need to sell the home outright. You can always exchange it 1031 to defer taxes, or refi it again in year 41??? I wish I'd have kept 100 of the homes I bought in Cal in the 70's. I'd be richer Rich now..