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Podcast Hard Money Lenders Books Washington
BlogArrowFlipping HousesArrowShould You Flip Houses or Own Rental Properties?
Flipping Houses Aug 21, 2020

Should You Flip Houses or Own Rental Properties?

Brandon Turner
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
594 Articles Written
Young woman looking over the City of London at sun set.

Recently on the BiggerPockets Podcast, I was speaking to Thach Nguyen, an investor and agent located in Seattle. He had a powerful point about real estate investing he was determined to relay to others: "You've got to own real estate if you want to be wealthy.”

Related: The Single Best Strategy for New Investors

Think You Want to Flip Houses? First, Consider This

I asked Thach to elaborate, and here’s what he said.

After doing this now for 30-plus years, flipping houses—like selling real estate—means you're on this treadmill, and you are running. The minute you get off the treadmill, you're not making more income selling real estate anymore. Flipping houses is the exact same way. When you're on the treadmill running, it's fine. When that treadmill stops, then you've got no more money.

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And let’s be honest, why are we flipping houses in the first place?

Everyone I know, they got into real estate—they all got inspired somewhere, somehow—because they want to own real estate sometime down the road, so you can actually live off a passive income. But they got caught up, in my opinion, basically comparing themselves to the Jones’.

“Well, Brandon flipped 20 houses. I’m gonna do 30!”

“David flipped 30. I’m going to do 50!”

And now, they’re in this rat race chasing who gets the most houses. But at the end of the day, 20 years down the road, they’ll realize, “Crap, I’ve got nothing to show for all my work, and I’ve got no passive income.”

So, they’ve got to keep running on the treadmill—even at 90 years old.

Related: Buy & Hold Real Estate is the Ultimate Investment: Here’s Why

I agree with Thach.

I can’t tell you the number of investors I’ve talked to who are major flippers, and they’ve been doing it for decades. And then, they realize, “Yeah, I’ve got to get myself some passive income. Because if I stop, I’m broke.”

Even if they are living great now, have a great car, a great life, a great house—as soon as the market crashes or, you know, something slows down, they’re almost immediately struggling.

What do you think about flipping houses and about the sustainability of this investment strategy?

Weigh in with a comment below!

By Brandon Turner
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 taught millions of people how to find, finance, and manage real estate investments. Brandon began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, Brandon is the managing member at Open Door Capital. With nearly 300 units across four states under his belt, he continues to invest in real estate while also showing others the power and impact of financial freedom.
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11 Replies
    Michael A DeAngelo from Columbus, GA
    Replied 6 months ago
    I’d fully agree. Flipping can be a good way to start you can learn a lot but stack that cash and buy cash flowing assets. I’ve been spending some time w a investor in my area and learning his business model he is a flipper and has done over 100 flips claims he has never lost money on a deal but over time has collected 20 doors for himself. Cash flowing assets so once he’s tired of doing work he can go relax and live of pure passive cash flow. Now that is where o wanna be.

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    William Tran Rental Property Investor from Racine, WI
    Replied 6 months ago
    I only flip houses so I can have more money to buy more rentals. I always walk into a deal with the intent of holding it as a rental 1st. If the profit margin is too good to resist I will then flip it. I started 2 years ago and have 30 doors now generating 23k a month in passive income.
    Natalie Wright Homeowner from West Valley, Utah
    Replied 6 months ago
    This is a really inspiring story! We're you in real estate or construction when you got your start or did you hire others? Trying to figure out the best way to get started

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    John F Strothers
    Replied 6 months ago
    This article is enlightening. Its dealing with mindset. Creating continuous wealth vs lifestyle wealth for today. Relaxing in later years vs running for a sale. Our choice in this matter has a lot to do with, are we willing to sacrafice self gratification now so we can live how we desire later.

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    Jason Clerico
    Replied 6 months ago
    Not sure how these landlords own all these doors and just kick back and make money. I only own a couple and they keep me fairly busy. I am not saying it isn't a good way to make passive income, but it isn't really a free ride either.

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    Elizabeth A Shatzkin
    Replied 6 months ago
    This is the question we are currently asking ourselves. We started with a flip, just got a full price offer for it with the house being on the market for only one week, giving us a good return. We are also purchasing a duplex at this time to start getting units we can hold. Since we are not 'rich' folks, we are thinking that future flips will be used to fund purchasing of units so that we can retire with passive income some day. We are also planning on using the BRRR method once the units are rented, giving us cash once again to buy more units or fixers. The question is really about how many doors you need to achieve that passive income, and how to know the limits to leveraging properties. If someone has a calculation on that to make sure you are not over-leveraged, I would love to hear your thoughts.

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    David Rucker from Honolulu, HI
    Replied 6 months ago
    I think the article's points are valid regarding flipping being a treadmill. In many ways it's not unlike having a job working for someone else. When you stop working, the money stops also. However, the good news is that the answer to the business model question of "flip" or "hold" is that they are not mutually exclusive. In our case we decided to add flipping because we wanted to be more actively involved. In the past when I was working a demanding full-time job, I had zero interest in flipping. At some point I suspect we will tire of flipping and just remain as passive investors.

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    Juan Banda
    Replied 6 months ago
    I disagree to a certain point. Don't forget about the laws put in place for tenants regarding eviction. I think Thach not revealing the whole truth about is Gains and losses tell us if you had a loss or shift in revenue?? Flipping and investing should go to together. What do you think??

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    Tom Fenoglio New to Real Estate from Buenos Aires, Argentina.
    Replied 6 months ago
    If the original idea is passive income, flipping houses should be for building wealth quicker. If someone stop flipping and has no capital, that means that you are spending all the money..

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    Sarah Msuya Rental Property Investor from Portland, ME
    Replied 4 months ago
    I think a little bit of both is the sweet spot. Scale passive income by raising capital with some flips to continue investing in more passive rental properties.

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    Steven Bowdich
    Replied about 2 months ago
    This thing is completely excluding out the other ways to generate passive income. If you can make better rates in flipping homes, then flip homes. Nobody says you have to spend the money. You can always invest it in a REIT or the S&P 500 to generate passive income. While it doesn't generate as much as rentals would, after the disaster that we have seen with rent moritoriums, it reduces your risk dramatically.

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