Real Estate Investing Basics

Is It Better to Flip or Rent? Here’s Why Buy and Hold Is Best

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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There are many ways to make money in real estate. You can wholesale, fix and flip, develop, broker properties, and more. But there’s a difference between making a living in real estate—aka simply having another job—and investing in real estate. You might be asking, “Is it better to flip or rent?”

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In my opinion, there’s only one answer. If you want to make real, life-changing money, you need to invest in real estate. You need to buy property and hold onto it.

When you wholesale or flip a property, you're working for the asset instead of letting the asset work for you. It's a job versus an investment. Yes, if flipping is your day job, then great. But buy and hold needs to be part of your strategy from the beginning.

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The 5 Advantages of Buy & Hold Real Estate: IDEAL

Over the years, I’ve wholesaled and flipped properties, and I’ve worked with clients who have been very successful in doing this. I can honestly tell you that I regret selling almost everything I’ve ever sold. The only sales I don’t regret are the ones I exchanged into other properties. Here’s why.

rental-property-financial-benefits

I: Income

Most investments offer either a consistent return (i.e. annuities) or the potential for equity appreciation (i.e. stocks). Real estate offers both. Good buy and hold investments offer positive cash flow from rents that not only offset the expenses and debt service, but also provide a monthly income. The average annuity only pays out 3.27 percent per year.

A halfway decent buy and hold investor can beat that any day.

D: Depreciation

Flipping is a great business, but one of the biggest cons is that the tax man always gets theirs. Not so with buy and hold.

The IRS allows you to write off the value of any property over 27.5 years. Yes, this depreciation counts as negative income—but it's only negative on paper, since the costs of keeping a property in good condition can be paid for out of the rental income.

Thus, the depreciation “losses” wipe out the positive cash flow from the property and remove any tax obligation. Unfortunately, due to the Tax Reform Act of 1986, only active investors can take advantage of this.

Related: Understanding Rental Property Depreciation: A Real Estate Investor’s Guide

E: Equity Build Up

With a mortgage, unfortunately, comes the obligation to pay it back. Fortunately, the cash flow mentioned above allows an investor to pay back that mortgage without spending any of their own money. Instead, the tenant pays for it.

Furthermore, each month—assuming you don't have an interest-only loan—part of the principle is paid off, too. For a 30-year loan, about 15 to 25 percent of each loan payment goes directly toward the loan's principle. That adds to the equity you have in the property.

Plus, accelerating equity pay down—the simple concept that, with each payment, you pay more to principal and less to interest—helps build up equity faster the longer you own a home.

A: Appreciation

Real estate, like any other asset, can go up or down in value.

Many have been scared off by the crash in 2008. Worried history might repeat? A look at long-term real estate prices may encourage you. The trend is consistently up. In fact, over the past 40 years, real estate has gone up an average of 4.62 percent per year. Combined with accelerating equity pay down, this means that your equity grows exponentially the longer you hold a property.

Some have pointed out that the stock market generally has a better return than real estate. True—but deceptive. Real estate is generally leveraged at a rate of four or five to one. Stocks, on the other hand, are rarely leveraged, especially after the massive losses taken by those “buying on the margin” before the Great Depression.

L: Leverage

If you invest $20,000 into the stock market, and it goes up 10 percent, you’ve made $2,000. If you invest that same money into real estate, you can buy a $100,000 property with an $80,000 loan. Let’s say it only goes up five percent. Well, you’ve made $5,000. Or in other words, you’ve made a 25 percent return!

Technically, yes: the stock market has a higher return on average. But that’s immaterial. Your returns with real estate are based on a much higher amount than your principal investment.

One might think this makes real estate more risky than stocks, but that isn’t so either since, as Zack Finance points out. “Stock prices are typically more volatile than real estate prices,” he says. A buy and hold investor who invests right can make it through major downturns like the 2008 crisis—which saw stocks drop as much as real estate, by the way—with the positive cash flow from the property.

In the long run, real estate and stocks both go up. So if you can survive the downturns with positive cash flow, you’ll be just fine in the long term.

Related: 3 Powerful Ways to Use Leverage in Real Estate Investing

Is It Better to Flip or Rent Properties?

This really shouldn’t be phrased as a competition—after all, flipping is a great business, and flipping and holding aren’t mutually exclusive. Flipping can be a fantastic way to raise the money necessary to hold real estate.

That being said, there are several major benefits to holding:

  • Tax advantages, such as writing off depreciation
  • Passive income—whereas once a flip is done, the income potential of the property has ended
  • Easily scalable, because if you flip 10 houses one year, the next year, you still start with zero. Hold 10 houses? The next year you start with 10.
  • Equity, which allows you to refinance out and buy more properties, creating the opportunity of exponential growth

Common Buy and Hold Criticisms

Buy and hold isn’t perfect, and most successful investors use a blend of different strategies. But if you’re wary of dedicating your time and energy to buy and hold because of these common criticisms, think again: They’re easily refuted, and I’m happy to explain why.

“Stock Market Returns Are Better”

In addition to the reasons we’ve already explained, stock market and buy and hold returns simply can’t be compared on a one-to-one ratio. Stock market returns don’t include cash flow and principal paydown, either, in addition to their inability to be leveraged.

Home appreciation doesn't beat inflation by much, but that doesn't matter. Let's use an example with a 30-year loan—and say it doesn't cash flow one cent. You still pay down $8,000 in five years on $100,000 loan, which averages out at about 1.6 percent return per year. Since appreciation and inflation cancel out, you've still beaten inflation by 1.6 percent.

But of course, you only put down $20,000. So you need to multiply 1.6 percent by five—making it eight percent. Now you are beating the market by eight percent each year, and that’s without cash flow or appreciation.

Related: What Offers the Best Return on Investment? 145 Years of Real Estate vs. Stocks

“Leverage Is a Two-Edged Blade”

Yes, leverage can be a two-edged blade—small increases in a property's value can produce great returns, but small decreases can create big losses, too. Leverage is a powerful friend and a powerful enemy simultaneously.

Let’s say you have an 80 percent loan-to-value mortgage and the market goes up give percent. You actually made 25 percent on your money. But if it goes down five percent, you’ve lost 25 percent.

This is the reason that the stock market is efficient—more or less—and the real estate market is inefficient. You won’t find a smoking bargain on the Dow Jones, but you’ll find plenty down the street.

Those great deals let you take advantage of the benefits of leverage while insulating yourself from its risks. That’s why buy and hold isn’t as risky as it might see. Let’s say you buy a property worth $100,000 for $80,000, putting $20,000 down. If it goes up five percent, you make an additional $5,000—or a 25 percent return. And if it goes down five percent… well, you can cry yourself to sleep knowing you’ve now only made $15,000 instead of $20,000.

Liquidity is convenient, but it is real estate’s illiquidity that give investors the advantage. Illiquidity allows real estate investors to find great deals and thereby dull the other side of leverage’s blade.

“Property Management Sucks”

The final criticism is the only one I agree with. What if you have the tenants from hell? Being a landlord is hard. Perhaps you can find a good property management company—but there are plenty of bad ones. Or perhaps you can do it yourself, but that's a lot of work, and not all of it is pleasant.

Property management is one of two major cautions I would give someone regarding buy and hold. The other: buy and hold in a stable city—preferably a growing city, but at least a stable one.

If you are willing to do this, then there simply is no better investment around than buy and hold.

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Is Now the Right Time to Buy and Hold?

You may be wondering if now is the right time to buy.

I’ve bought and sold properties through good and bad times, and believe now is always the right time to buy, as long as the fundamentals of the purchase are sound. By that I mean:

  1. It cash flows.
  2. It is a good product in a decent location.
  3. You’re not over-leveraged.

Generally, if you’re worried about real estate cycles, don’t be. There are cycles, yes. But over the long-run, values always go up. With buy and hold, timing the market isn’t important—smart decisions are. Whatever you do for a living, if you want to make real, life-changing money in real estate, buy and hold as many properties as you can.

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Questions? Comments?

Join the discussion here.

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has tau...
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    Barry H. Investor from Scottsdale, AZ
    Replied 4 months ago
    BRAD - Your article is timely in a market of uncertainty - but you have driven the point home. You state "...NOW is always the right time to buy as long as the fundamentals of the purchase are sound..." Your story at the end of the article is EXACTLY the same as my story - started in 2004 (not 2003), had 7 doors and they all TANKED to approximately 50% of the value of what they were when I bought them in 2008-2011 (also in PHX by the way!!). Like everyone else, I freaked out, then I asked myself if it really mattered that the "values" had dropped 50% when the cash flow was the same....Answer = No. Besides, I did not buy those doors to flip them. I was trying to quit my day job - and I did, at age 50, by then having moved from rentals to mostly lending. Because Buy/Hold/Rental ROI margins vanished in AZ, I moved the model over to Kansas City MO where I now "work" as a Turn Key Remodel Seller who puts tenants into a fully remodeled property (SFH) and then I sell to investors . To your point in this article "....NOW is always the right time to buy as long as the fundamentals of the purchase are sound..." The numbers remain sound for me, my Borrower/Buyers, my model and my market. Again, Brad, great summary of what should be obvious, but is sometimes lost in the panic of the day.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks for the note Barry, Sounds like we've both been through a cycle or two. Nice job moving to a stable market like KC.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 4 months ago
    Exactly. Brad - After all this is over I'd love to meet you for a coffee or beer sometime. This is exactly how I approach my investing, also in Denver. I am not a real estate business owner. I am a real estate investor. I do not wait to buy real estate. I buy real estate and wait. I buy and capitalize my real estate, reviewing my expected return on equity, cash flow, and capitalization such that I have strong projected returns, but will NEVER have to commit more capital to the existing portfolio. I invest for the long-term appreciation and cash flow I believe I am likely to realize here in Colorado.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Scott, I'd love to meet up when we all get let free. I like your long term approach and i'm sure it's working well for you.
    Pramod P. New to Real Estate from Parsippany
    Replied 4 months ago
    Nice Article Brad.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Pramod
    Stephen Brown New to Real Estate from Perrysburg, Ohio
    Replied 4 months ago
    Thank you for posting. I keep over-stressing on getting started and if I am wasting time... and some nights I can't sleep from it; however, this is a long term wealth building game. I just need to get started and everything will go from there!
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Could be some good buy opportunities coming up Stephen. Go for it.
    Dave Rav from Summerville, SC
    Replied 4 months ago
    Agreed with the investor vs RE worker mindset and approach. The argument for keeping rentals in your portfolio is a good one as well. But, I have different beliefs though on holding onto "every piece of RE" I ever bought. For instance, some deals were *specifically* entered into for a flip. They would not cashflow to a significant degree then, and even now if I held them, would not be "home runs" when compared to the deals I entered into PURPOSEFULLY for buy and hold. I do what deals make sense for the particular exit strategy. It sounds like appreciation was very good to you, which may have impacted your results. However, there are parts of America (midwest especially) where appreciation is a bit more reasonable (if not down right lagging). Not everyone has the luxe of 20% YOY appreciation. And, actually, nor are those appreciation increases sustainable or healthy for the market. I'm not going any further onto this tangent, so I'll end it here - eventually there is a ceiling effect on this kind of lop-sided appreciation.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Good points Dave. Every deal is different and I have flipped for the purpose of making money so I can buy something I want to hold. My regrets are when I just sold and didn't roll the money into a bigger and better investment. Appreciation is a big bonus. I buy based on a cash on a cash return analysis assuming nothing for appreciation. However, if it's in a place where people want to live and is a property people want to live in, then chances are the appreciation and rent growth will come. Even in midwest markets there are sub-markets that have experienced better rent growth and appreciation than others. Certain areas of Kansas City, for example, have done very well over the last few years and other areas (sometimes just across the street) have not.
    Ruth Lyons Realtor from Highland, MD
    Replied 4 months ago
    Agreed and thanks for the article. Prior to the effect of the virus, it was a seller's market where I live in the Balt/DC area. That seems to be quickly flipping to a buyer's market. Have courage and move forward. It is always the right time to buy for the right deal. I'm closing on a buy and hold on Monday, and looking for more deals.
    Brooke Booth Rental Property Investor from OR
    Replied 4 months ago
    Thank you for this reminder! We have two rentals that we have rehabbed and are now looking to get tenants in them. Some have said this is not a good time to get tenants, but, I’m thinking the same rule above applies. Time. Well, at least, I’m hoping that’s the case. 😂
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Brooke, Every market is different but I just easily filled one of my vacant units with a very good tenant. People still need a place to stay and the good tenants can still pay.
    Michelle Fenn Real Estate Agent from Cleveland OH
    Replied 4 months ago
    Great points Brad, I too am I buy and hold investor, not by planning but by necessity. My husband died in 2009 and left me a life insurance policy that I could not put in the tanking stock market. This was the best misfortune of my life. Buying, renovating and renting in good areas allowed me to sell multiple properties in 1031 Swaps over the past year. I now own properties in even better neighborhoods. Advantages stable rents, appreciation and ability to sell quickly at a profit.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Nice job of doing the right thing with that money Michelle. Sounds like you have a knack for it!
    Collin Radake
    Replied 4 months ago
    Brad, I love your story as well, but as a female buy hold realtor investor, the bills are overwhelming. Utilities have risen, and sometimes you can not control your spending when things happen that are out of your control. In an ever changing world, how do you manage your money, and keep from going under when you have so many homes to account for. I bought multi families and I used to think more return, but with utilities its hard to split them up. Insurance and holding fees are expensive when you have so much brick as I say. What is your advice to someone that feels buried in debt with these properties and its like its always one that is giving your problems. Maybe I don't manage them properly, but I pay for all repairs and I do not do work on them, I sell real estate to compensate for bad months. Also, it seems harder and harder to get good help, especially if you're a female.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Collin, What market are your properties located in? There are a few other questions I would have before I could really give you good advice but one thing I see fairly often with some of my investor clients is that they get stuck in a bad cycle with their properties. i.e. they don't or aren't able to keep up with maintenance so they don't get good tenants, they have high and costly tenant turnover, and the tenants are at below market rents, so they can't afford to maintain the property, so they don't get good tenants, etc. One of the fundamentals I spoke about in my article is not being over leveraged. When you owe too much you can't weather storms or take care of unexpected maintenance items. The trick is to keep the property nice so you get good tenants at full market rent that want to stay, then you can afford to keep the property nice so you can get good tenants, at full market rents, that want to stay, etc. That's the cycle you want to be on. As I mentioned this is not passive income, there is work to do. It's hard for everyone to find good help. You need to work hard to find good contractors to help you out and this is ongoing work because contractors come and go. To control expenses, skip the middle man. For example, find a good painter that does the work himself and doesn't hire a crew to do it. He will be much less than a company with painting crews. Same goes for plumbers, electricians, etc. Find a good handyman that is reasonable that can do basic plumbing and electrical and small jobs. He will charge much less than a plumber if all he's doing is fixing a leak or installing a new sink. My handyman also installs water heaters for much less than a plumber. Build a network of other owners and people in the business to share references to these types of people. We are always helping our clients by referring these types of service providers to them. You don't have to do the work but if you want to save money you have to manage the project yourself or hire a good property manager that will manage things for you. Also, hold tenants responsible for the damage they cause and charge them back. Find a way to fairly charge them back for utilities. Make sure they understand the expectations and hold them to it. It's important that you maximize your income so you can stay on the right cycle.
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied 4 months ago
    Hi Collin, Your gender only matters in RE if you LET it matter. The math is the math. Utility costs aren't based on the gender of the landlord, and increasing costs is why rent needs to go up periodically. As far as repairs, if you don't do the research on how much a project should cost you risk getting ripped off no matter which gender you are. One silver lining of this whole pandemic is that the labor market will be flooded with a lot of very good workers at reasonable rates. You will still need to do your due diligence in figuring out whose going to do a good job vs who's going to just flap their gums about how good they are, but if when you find good people you treat them professionally and pay them fairly you could end up with a solid, loyal crew long term.
    Sonja Sevcik
    Replied 4 months ago
    Yep - My 1st investment was in 2006 for all the wrong reasons. We thought we would short-term lease a property in my home town and be able to enjoy it ourselves occasionally. Short-term doesn't work out too well during poor economic times. It tanked in 2007 but I put in a long-term tenant and held on. We paid the cash flow short-fall for several years out of pocket with our day jobs. The property accrued losses and we invested from 2010-2019. All of those properties followed the rules to buy and hold - beginning with cash flow day 1 and ending with low leverage. The losses offset income while we invested in better opportunities. This recipe appears to be working - knock on wood and fingers crossed. I would not buy anything for the next six months, unless you find someone desperate (think at least a 20% discount from the March market). Just like the stock market - real estate will correct but it takes a bit more time. Follow the market, save your money, and get ready.
    Timur Abdullin
    Replied 4 months ago
    Sonja, where do you invest that you anticipate to get a 20% wedge deal? Also, any ideas on how long to wait until after the virus has struck us and after the stock market began to collapse to start seeing considerable discounts? I operate in the hot market that the eastern NJ state is due to its proximity to the metropolitan NY state. It is the unofficial suburb to Manhattan. Also, I was hoping for more 3-4 MFHs to enter the market with the panic that's permeating every fabric of the finance world. But, nothing so far. Houses are getting multiple offers and get bought, still, at above the asking price in every case. Finally, how far behind does MFH RE market lag after the stock market?
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Timur, Too early to tell how this will shake out. I was just looking at the data in my local market but the only data we have is from March so nothing changed. After 911 in 2001 People pulled their money out of the market and put it in real estate. Real estate values rose from 2001 to 2008. So there's no guaranty that values will fall. I'm brokering 2 transactions right now where the buyer is getting what I call the Covid-19 discount because the tenants have lost their jobs and are temporarily unable to pay full rent. The buyer's used this to negotiate a better deal. 6 months from now if everyone is back to work that discount may disappear. There could be distressed sellers out there in a few months but it could also be very competitive for those deals.
    Brian Garlington Realtor from Oakland CA investing in Cleveland & Oakland, CA/East Bay Market
    Replied 4 months ago
    Brad, Outstanding article! Here in the San Francisco - Oakland Bay Area I have been telling people for years to buy and hold. Even if they don't have the income to afford it here. Buy and hold somewhere else out of state because 75% of that gross rental income from that out of state property can help you better qualify incomewise to accelerate your ability to buy here in the Bay Area. I've even coached people to consider tenants with a Section 8 Voucher to be the people they place in their buy and holds because the money is guaranteed for the most part by the government and with proper screening your buy and hold tenants can be your perfect hedge against inflation and a recession.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    I love it Brian! 90% of my tenants are Section 8 and I am experiencing very little impact by what's happening right now. I provide very nice places for them to live and they love me for it. I have extremely low turnover because they stay forever. i screen them just like any other tenant and take my time selecting a tenant when I have a vacancy. I've had a few problem children but most are very good tenants.
    Neil Aggarwal Lender from Richardson, TX
    Replied 4 months ago
    In Dallas, it's hard to find cash flowing deals. I hope that changes soon.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Taxes in Texas are like paying HOA fees. They ruin the numbers. Buy elsewhere if you can.
    Randall Prosise Rental Property Investor from Scottsdale, AZ
    Replied 4 months ago
    I like your term "ongoing income" as it relates to your investments (and mine). I would rather have ongoing income over passive anyway. I enjoy working with my investments and keeping track of every detail. Cheers!
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Randall, Me too!
    Scott J Sawyer Investor from Fountain Inn, SC
    Replied 4 months ago
    Agree - NOW is always the right time to buy, as long as the fundamentals of the purchase are sound. lOVE IT! ..... My go-to is .... "It's always a good time to buy real estate, just depends on your strategy and desired outcome,"
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Scott
    Cynthia DeLuca
    Replied 4 months ago
    I could have written this article because every word of it is how I have felt for years. Great article! I buy and hold and currently am so thankful that I’m these trying times of COVID-19, where I’ve lost all my income from my “real job”, I still have a tremendous amount of income from my rental portfolio. Buy and hold! Good luck in your journeys.
    Peter Vander Ploeg Financial Advisor from Denver
    Replied 4 months ago
    Thanks for your article, Brad! That's some sage advice for the real estate investor. I have been to a few of your local events, but have not had a chance to meet you in person. I look forward to meeting you when we get a chance. Until then, keep writing!
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Peter, I look forward to meeting you as well.
    Jenny Li Rental Property Investor from Raleigh, NC
    Replied 4 months ago
    Thanks for the article. From my experience, some market tanked and it hasn’t come back up. I bought my home in CT in 2005 at high when the market was booming. Market tanked shortly after that. For all these times, 14 years or so, I still have a 15% loss in equity. So whether NOW is a good time to buy is a tough decision. I guess it depends on your strategy.
    Alfred Johnson from Rocky Mount, NC
    Replied 4 months ago
    great read Dave I really appreciate your insights and the timeliness of your article I'm just getting warmed up in the industry still working at daytime job but after that real estate thing I'm after it!
    Boris Harhaji Investor from Washington, DC
    Replied 4 months ago
    I've just bought my 2nd and 3rd property (talking about a "bad timing") However, one just obtained a solid tenant and 3rd still in process. That being said, my goal is 10 houses in 2 years, and I just could not wait forever to buy at the bottom (not cause I can'twaot, but I can'tpredict it). My strategy was start getting feet wet and yes, save some when the market turns so you can reap the benefits. So now I have my "OK" timing on first from few years ago, "potentially bad" on the 2/3, and 7 or so more to get over the next few years, perhaps with even better results. Can't wait to time everything perfectly. As long as the cashflow is sound and overleveraged is not the issue (you have plan B and plan C), I think this market can work too. I did the same with my stock portfolio, 12/2019, moved 1/2 into money market, and now dollar cost leveraging it slowly as the specific price points are reached.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Keep going Boris, hopefully some good buy opportunities coming up.
    Katy Skjerping
    Replied 4 months ago
    Hi Brad, I'm a newb. Your article spoke to me because I too grew up with parents who had properties, so we spent weekends going to the janitor supply store to clean out the office bathrooms etc. I too work/ed in an entirely different industry but now that I have a young child at home the real estate pivot made more sense. Although it took us some time to save the funds and find just the right property, we've only been actual landlords for a few months and of course this time of chaos has us bracing. Then I read this and asked myself: • Does it cash flow? Check. • Is it a good product in a decent location? Check.•You’re not over-leveraged? Check! Thank you for the simple triangle of good sense, in fact it can be my mantra moving forward. Hope this community is safe at home with tenants who are safe at home too. Sending thoughts and prayers to those who may be suffering great losses right now.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Katy, Thanks for this really nice reply. Best wishes on this investment and I echo your thought for those in this community to stay safe.
    Anne Nguyen Investor
    Replied 4 months ago
    Thank you Brad for the article. That’s my strategy too. I’m in the analysis process of SFH vs small multi family vs townHomes. I’m curious what metrics you guys have for cash on cash return or cash flow to consider it a good deal? Thank you
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Hi Anne, Depends on your market. I would shy away from a townhome because HOA fees typically ruin the cash on cash return. Single family homes are great when they're full and suck when they're empty unless you own a bunch of them and the money from others will offset the loss in income from a vacancy. I like duplexes because they live like a single family home (have a yard, etc) and the income from one unit can help pay the bills if the other unit goes vacant. These appeal to a family so the tenants stay longer. In Denver we are looking for a 6% or better cap rate on current numbers and 8% or better cash on cash return on proforma numbers after rehab. That usually results in a 12% or better total return when you factor in debt reduction. In other markets you can achieve a higher return but you might not get the same rent growth and appreciation.
    Jay Mat
    Replied 4 months ago
    I like your story Brad. Thanks
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Jay
    Ryan Basye Investor from Omaha, NE
    Replied 4 months ago
    Great article. Glad to know there are some who share my perspective. Too many people jumped on the BRRR method or FLIP/Wholesale. I started in Denver as well in 2003 and ended up moving back to Omaha in 2005 - selling everything before the drop (karma for moving close to mom). Since investing in Omaha, I have dozens of rentals with equity levels that will sustain any market. Along with CASH FLOW, true long term investors know the benefits of depreciation, write-offs, and low taxes on the actual income. There is always some work on your investments, but KNOW you are working for your bottom line! THANKS
    Al Richey Rental Property Investor from Oak Point, TX
    Replied 4 months ago
    Great article, and I am 100% with you that I also wish I had held onto most of my earlier flips. Started out 4 years ago flipping here in North Texas, have learned a lot along the way with some lessons harder than others (but blessed that we never lost money on a deal). The doors I have held (one duplex and four single family) have all appreciated in value and have had little to no vacancy. Focus now is buy and hold with a preference for duplexes and quads, and an occasional flip if that is the best course for a specific deal. We are in uncharted territory with the impact of the virus and related economic impact, but it appears to be a buying opportunity as long as we are very-very diligent with the analysis and numbers, now more than ever.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Al, good perspective and i like the product you're focused on.
    Carlos Varum Jr from Providence, RI
    Replied 4 months ago
    Hallelujah! Great Common Sense Article - You covered everything except I felt you didn't go into the BEST benefit in depth (Equity). You never have to sell, because you can always cashout refi or put a Line of Credit on the 70%-80% of the equity left in the property as it appreciates over the years! 3 years ago I gut renovated a 4 family and turned it into 4 luxury apartments with 2 Penthouses. It appraised for $950,000 back then. The Interest rates have dropped like crazy, so I just called my bank to refinance it. Since my rents went up rapidly, but my expenses only went up minimally and there are no comps (no one else in the area has built or sold a luxury 4 unit with 2 decked out penthouses in this area) the appraisers have to use CAP rate to figure out appraised value... and it came back at $1,400,000!!! I told the bank, GREAT... Let's refinance the existing balance of the mortgage ($655,000) at the lower rate (saves me $1000/month in cashflow) and give me a Line of Credit for the balance of the 70% of equity ($325,000). I now am saving (making) an extra $1000/month in cashflow AND have another $325,000 to pounce on the market with if it drops, find a deal of a lifetime or use if I am in a bind.. but I don't have to pay interest on it unless I use it. Thank you Rich Dad Poor Dad... keep assets, get rid of liabilities. Never sell a positive cashflowing property... its a Win (income), Win (tax advantages, and the biggest WIN (Equity)!
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Nice Carlos! Good story
    Wes Salous Investor from Oklahoma city
    Replied 4 months ago
    Good info Brad.. Thank you. Will be in touch for advises
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Wes
    Cornelius Camp Real Estate Agent from Chicago, IL
    Replied 4 months ago
    Great article!! I was thinking I should go the exact route and your article just confirmed it. I wish I was in Denver so we could meet up for coffee. Take care and again, great article.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Thanks Cornelius
    Adam Wallen Rental Property Investor from Grand Rapids, MI
    Replied 4 months ago
    Great article, Brad. I completely agree that the "real" money in real estate is in buy & hold investing, as this allows you to capitalize on all of the wealth generation potential for the investment. However, I also think wholesaling or flipping can be a great way for new investors to accumulate capital to reinvest in long term buy & holds.
    Brad Uhlig Real Estate Agent from Denver, CO
    Replied 4 months ago
    Agreed Adam. Hope you're doing well in MI
    Enrique Gonzalez Investor from El Pueblito, Querétaro
    Replied 10 days ago
    And apparently you can also grow food out of Real Estate, some people call it a farm or a ranch. Crazy loco no! LOL!
    Keith Andrews Real Estate Agent from Colorado Springs, CO
    Replied 10 days ago
    Nailed it! Don't let the 2007-2009 recession scare you out of the best investment you can ever make especially at these super low rates. With all the money the feds are printing right now we are about to see some of the biggest inflation rates probably ever. I'm talking 5-7% a year. Your money much safer in real estate especially if you have a tenant paying your mortgage for you. Just make sure you are buying and holding in the place. For me that's Colorado Springs. The market's red hot and as a landlord I have a great pool of "essential worker" renters. Many of my clients are leveraging their 1031 exchanges to move their portfolios there.
    Javier De la Rosa Rental Property Investor from Barcelona, Spain
    Replied 10 days ago
    Completely agree Brandon! As in any balanced financial portfolio, the right mix of strategies and assets is the key to a successful investment. Flipping can be of great use to build up the muscle needed to scale up a buy and hold strategy. It shouldn't be a "black or white" question, but two strategies that complement eachother.
    Mark Broadway Real Estate Agent from Springfield, MO
    Replied 9 days ago
    You hit EVERY point perfectly. I tell people new to real estate wanting to invest these very things every time and they are amazed how it works. The one thing I don't emphasize is the appreciation because of the points you bring up; going up and going down. It's very easy to get over leveraged and drunk on the money but if someone is prudent enough to realize this, willing to take the cons of real estate, its fantastic. One point I do add is what investment can you make that is completely insured in the event of fire, or other disaster? Leverage 80% and buy more! Stocks are definitely not insured and you can't leverage that much and can go to zero value. Perfect article.
    Steven Rich Real Estate Agent from Panama City, Panama
    Replied 9 days ago
    Very good blog post. I would add one thing to the "tax advantages". Flipping properties of every kind do not qualify got IRS Section 1031 Like-Kind Exchanges tax-deferrals. Holding onto income property leads to qualifying for a 1031 Exchange when its time to sell. As long as the seller follows the rules (like using a 3rd party intermediary to hold the sales proceeds) and purchase replacement properties within the required time (maximum 180 days) and a couple of other minor requirements, all of the gains are tax-deferred. If the investor keeps buying and holding the replacement properties, all the deferred taxes become forgiven when passing title to the heirs after death. The heirs pay no taxes on the equity buildup if they sell right after getting title.
    ROBERT HANEY Investor from Sugar Land, TX
    Replied 9 days ago
    Overall I think this is a good article. I buy and hold and flip. Like another poster, I know usually before buying which it will be. One interesting thing I noticed in the OP's post is the assumption that leverage (mortgage loan) would be used and that leverage is an advantage. Yet there is a discussion of paying an extra amount each month to pay this advantage (loan) off early. Why accelerate getting rid of something that is an advantage? Plus the investor had to buy the loan ($5,000 or more cost just to get the loan in place) and is likely getting more loans. I don't get it unless the investor has stopped borrowing money. I buy for cash, save the $5k loan purchase cost and increase my cash flow by a large factor. If I have to replace an AC I still have a good cash flow that year. With a mortgage the the new AC would wipe out 2 years or more cash flow. Leverage is great until a big problem hits like AC, roof, flood, hurricane, COVID 19, tornado, etc. I am always amazed when an investor buys one of my flip properties, which happens a couple of times each year. I closed on a sale 2 weeks ago where I learned that the buyer was an investor on the closing day. They laid 20% down on $173,500 purchase so that after closing costs he and his wife will have about $179,000 invested. The house had nearly everything new so maintenance should not be an issue for them. It will rent quickly for about $1350/mo. I paid $93,000 all-in and $30,000 remodel so I had $123,000 invested. I generally want 1% of my investment plus $200 for a property in this price range. So my target rental price would be $1230+$200=$1430 to give me an excellent return. So I flipped it for a $40,000 gain and moved on. The point is to observe how much investors vary on the criterias for rental investing!
    Mamadou Diallo
    Replied 4 days ago
    Great article, I enjoyed reading it and it gives me full insight of what to look for and what comes next. With RE investing no matter how you invest if it’s cash flowing, then When the markets tank up, down or sideways you will weather the storm just fine. Just use due diligence.
    Crystal Smith Real Estate Broker from Chicago, IL
    Replied 3 days ago
    Great article but there's something called the Time Value of Money. When evaluating an asset for a long term versus a short term hold one must consider time value of money in the equation. As asset that can produce $100K of cash flow today from a flip is more valuable than holding on for it to produce $100K over 5 to 10 years. Even w/ the capital gain tax when one consider what you can buy w/ $100K today versus $100K 5 to 10 years from now, I'll take the $100K today. But still great article.