As we meet additional contacts and speak with other real estate investors, one question we are asked frequently is,
“Why don’t you Flip Real Estate?”
I understand where the question comes from, as many individuals feel flipping is the easiest path to investment riches. They make it look so easy on TV and sound like a cinch in the real estate Books. The fact is, it is not easy but it certainly can be very profitable if you can devote the time and energy.
There are four reasons we don’t flip properties as part of our business model:
First, we already have full time jobs and we don’t want another full time job. If you are going to flip real estate for maximum profit you will need to focus on flipping deals quickly. Having a full time job gets in the way of a quick flip. Losing days to travel or work can significantly increase the carrying costs of a flip. The successful flippers we know treat flipping like a full time job and need to get in and out of a deal as fast as possible.
With the Buy-and-Hold approach, we can lose a day or a week, and in the grand scheme of things wouldn’t really feel the impact. We are working towards the steady long term cash flow and not the quick turn of a flip.
The second reason we don’t flip real estate is that our investment market is three hours away from home. While the drive is easy, it is far away and we can’t make daily trips easily. If you flip properties for a living you will need to be onsite all the time and drive by the house unexpectedly to ensure work is progressing as planned.
Even if you don’t do the work yourself, you would need to manage the work, timeline, and quality of your contractors. Being three hours away significantly reduces our ability to efficiently perform such tasks.
The most important reason we don’t flip properties is, we don’t like to sell. We buy properties with the intention of holding them for 10 plus years. We are building a stream of cash flow payments that will build into a mighty river as time goes by. Selling a cash flow house just doesn’t make sense to us.
The last reason we don’t flip real estate is that selling property in this market is really hard. We are in a strong buyers’ market and we want to take advantage of the market condition and not become a seller. Perhaps in five years when the market is reversed, we might sell some properties only to gain liquidity or to buy another apartment building.
In the end we know flipping real estate can be very profitable if you do it right, but we don’t want the extra work, we live too far away and we hate to sell our properties.
Good Investing
{ 9 comments… read them below or add one }
Amen. Know what you want to do. Real estate has many profitable faces, so it’s important to understand them all and pick the right one.
Greg
I agree, get good or very good at one thing and don’t get distracted by all the possibilities. Pick the investing strategy that works for you and be the best you can at it
Good Investing
Having a plan and sticking to it are critically important. Both flipping and long-term holding can be profitable, but having a plan and executing it will usually return greater profits than trying to chase a short-term trend.
Phil
Amen!!! Have a plan, be focused and be the best you can at that strategy!!!
Good Investing
Hey Michael — You make excellent points. You’ve also inspired a post, for which I offer my thanks in advance.
Jeff
Least I could do. I look forward to the Post
Good Investing
Good thinking and well articulated. Thanks
Al
Thank you
Good Investing
You certainly make good points but they are very particular to your situation and not necessarily good for most.
You forget one important point when you mention you don’t want to sell: the cash from a sale can be used to buy rental properties and pay for them in full. That way you create HUGE cashflow instead of the small cashflow you would have on financed rental properties. Plus you would not be accumulating more debt…