flipping and buy and hold?

Question

Is it unwise if just starting out to focus on both flipping and buy and hold properties? Our main focus is flipping but what looks like a good buy and hold opportunity has come on the market near a college. Any insights?

David Beard · Answer

It's a great idea to pick up some quality rentals while prices are still low (in most areas of the midwest, prices are still 20-30% below the peak).  Rent vs buy ratios also strongly favor buying, so it's a great time to acquire rentals.  Having rehab capabilities is a huge bonus in bringing props to a rent-ready state efficiently and economically.

There are techniques to minimize your ultimate investment in the property, such as using private/hard money to finance 90%+ of purchase/rehab, then refinancing out to conventional in 4-6 mths.

It's also a great idea to start holding properties to position yourself for getting bank loans, where lenders like to see two years of landlording experience on tax returns in order to count the rental income in your debt ratios.

Plus the rentals could always be flipped to turnkey investors down the road, should you be so inclined, getting similar profit margins as you enjoy on the retail flips.

Scott W. · Answer

you can do both...flip one then buy & hold another. you would be able to build capital, for the buy/holds, with a flip.

due to no new construction the past few years, flipping is becoming an increased method. it's going to take time for new construction to catch up with the demand...with the inventory being so low and most of the foreclosures being unisurable, the cash buyers are filling a need for home buyers.

Scott Costello · Answer

@Jessica Holwick The best way to learn is to do.  What may be a good strategy for one person might not work for another.  Do some research regarding the risks of buying and holding then determine if you can deal with them.  If so, then go for it!!  :)

Steve Smith · Answer

@Jessica Holwick   I see nothing wrong with doing both. My goal is to purchase four units per year that are  in need of rehab, Selling two after rehab for funding to buy future property and holding the remaining for future passive income

David T. · Answer

the experience you will get from flipping houses is invaluable and allows you to take a broader perspective on doing deals.

If the buy and hold opportunity you're looking at costs you some of your stake to hold, you should think carefully about it.

Good luck with your decision!

flipping and buy and hold?

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