Not sure where to start need advice - Flipping vs Rentals
New to Real Estate · Carrollton, TX · Member since 2022 · 8 posts · 2 votes
I am so lost when it comes to reading the forums and books, podcasts. My wife and I know where we want to end up, but have no idea where the starting line is. We want to have recurring passive income from rentals/ storage units/ land/ etc...(anything that will enable us to live freely and without worry once I am unable to work because of age. She will be coming into a sum of money in the timeframe of April 2023 from a family member selling land to a developer. We are thinking about doing a couple of flips at first to generate a flow of cash that we can use to start investing in rentals so we don't use all of the inheritance while our rentals start generating enough passive income ( and we don't know the amount she will be receiving until the family member announces). The more I read BP blogs, forums, listen to podcasts, books I read (not just BP books) the more overwhelmed I become as to the amount of possibilities out there to generate passive income. So is there anybody out there that can help point us to the white starting line?
Start with flips to build your seed money. Then continue to flip your larger seed money over and over, but use the profits to buy Cash Flow.
Understand that you don't flip properties, you flip your cash...through the properties.
Also, is there a particular medium I should focus on primarily for my education (just starting out remember)? I have been trying to do a little of everything - reading books in the morning before work, listening to BP podcasts and others while at work, and a few Youtube videos on my phone in between). I think trying to absorb information from a wide array of mediums might be the culprit of the overwhelming feeling.
Start with flips to build your seed money. Then continue to flip your larger seed money over and over, but use the profits to buy Cash Flow.
Understand that you don't flip properties, you flip your cash...through the properties.
Do what you are comfortable with. If you want to get into rentals, then why not start there? You can buy a place that needs a bit of cosmetic work (eg painting) and start there. Flipping is higher risk and depends on being able to hire good people to do the work or being able to do it yourself. If you are doing the work yourself, time is money.
I am so lost when it comes to reading the forums and books, podcasts. My wife and I know where we want to end up, but have no idea where the starting line is. We want to have recurring passive income from rentals/ storage units/ land/ etc...(anything that will enable us to live freely and without worry once I am unable to work because of age. She will be coming into a sum of money in the timeframe of April 2023 from a family member selling land to a developer. We are thinking about doing a couple of flips at first to generate a flow of cash that we can use to start investing in rentals so we don't use all of the inheritance while our rentals start generating enough passive income ( and we don't know the amount she will be receiving until the family member announces). The more I read BP blogs, forums, listen to podcasts, books I read (not just BP books) the more overwhelmed I become as to the amount of possibilities out there to generate passive income. So is there anybody out there that can help point us to the white starting line?
@Account Closed
Focusing on rental property is a no brainer if your goal is long-term or even generational wealth.
However, rental property investment requires serious investment capital and one way to generate that would be by fixing and flipping houses, so your proposed combination approach seems to be ideal at least in the short term. Some properties just lend themselves more to one approach than the other so this combination approach may even be a wise long-term strategy.
In order to grow your rental property, you need to generate cash and house flipping can be the means by which you do that.
Experienced investors caution against focusing only on house flipping because it requires constant attention, time, workers and employees, and energy.
This can lead to a lot of cash but no passive income.
I think doing both is a solid strategy. Remember that house flipping is a full time job. Even if you hire contractors for the work, you will be busy. There will be questions to answer, things to check up on, and problems that need solutions. You would think the professionals should be able to handle it, but they more than likely wont without your input.
If you have the time, then flipping is a great way to generate down payments for rentals! I've done it and I've helped other investors do the same!
Flipping is a great way to make money, its also a great way to loose money. If your goal is long term passive income, and you have the capital to invest from this inheritance, then come out of the gate investing in BRRRR projects and/or turn key rentals. Make sure you have a great Realtor and Property Manager (could be the same person) advising you. Good luck!
Do what you are comfortable with. If you want to get into rentals, then why not start there? You can buy a place that needs a bit of cosmetic work (eg painting) and start there. Flipping is higher risk and depends on being able to hire good people to do the work or being able to do it yourself. If you are doing the work yourself, time is money.
The thing is I'm not COMFORTABLE with any of it...I haven't done anything like it before. My concern is that the rentals seem to take a longer time to generate long term passive income. I don't want to burn through cash while trying to get my empire up and running.
@Joe Villeneuve I like your idea of starting with flips and use profits for rentals.
Do what you are comfortable with. If you want to get into rentals, then why not start there? You can buy a place that needs a bit of cosmetic work (eg painting) and start there. Flipping is higher risk and depends on being able to hire good people to do the work or being able to do it yourself. If you are doing the work yourself, time is money.
The thing is I'm not COMFORTABLE with any of it...I haven't done anything like it before. My concern is that the rentals seem to take a longer time to generate long term passive income. I don't want to burn through cash while trying to get my empire up and running.
@Joe Villeneuve I like your idea of starting with flips and use profits for rentals.
@Account Closed REI is a numbers game. If you don't know the numbers or how to properly calculate them I'd start there. That's the first step that changed my mindset. After that it's a learning curve on rehab budgeting (what to remodel/what NOT to remodel) and following a strategy. Pick one and send it over the fence.
There's a ton of resources at your finger tips in the BP forums. Just search it out and continue reading posts from everyone else. Stay around here for 6-12 months, learn, and research your market everyday, then start conversations about walking properties and buying the first deal. Everyone has slightly different goals and strategy.
I agree with @Joe Norman about aiming for BRRRR. It's a comprehensive approach to REI. You'll learn a bit of everything and hopefully end up with a cash-flowing rental. I've followed that strategy myself and it's been a great time. We have left money in the properties but I'm okay with it. It's equity and protection against us buying bad deals. I started with $30K and no experience. Anyone can do it but it takes sacrifice, sweat equity, and an investor mindset.
Unfortunately, in this business, everyone has an opinion. Usually, everyone has a different opinion. Since circumstances are different for everyone, this makes sense. What works for one person, in one part of the country, may not work for you in your part of the country. For what it's worth, my opinion for you would be: It depends... Depending on the amount of money you will receive as your starting point, that will certainly guide your circumstances in a particular direction. If you find it is only enough to get into a flip property, then you should focus on doing a flip, or a few of them, over the first 12 months or so. This will help you generate a decent amount of cash reserves. Once you have enough to safely continue flipping, but can tie some up in a BRRRR type situation, then cherry pick a property you might flip, ad value by doing a reno, and then rent it out instead of flipping that one. After you get it seasoned, refinance out of it and enjoy the cash flow. This is generally the easiest way to start for most people.
I started a few years ago with only $33k total in my first flip project and now have enough cash to self fund several projects at one time, while owning two SFR rentals as well. My next project is a multi-unit STR in a high traffic vacation area. Yes, it took a few years to get here, but I am normally able to finance my projects with my own sources, rather than using OPM, so I save on high interest. I never had to infuse anything more than the original $33k, and I have enough now to stay as busy as I like on projects without wondering where the money will come from. I have also refinanced the rentals at an excellent 3.99% rate and have zero cash in those properties, even after a reno, etc. They cash flow nicely. With a little patience and discipline, anyone can do it.
Finally, don't get sucked into buying property, just to buy. You make your money when you buy, so buy right. If it is a questionable deal, let someone else make the mistake.
Do what you are comfortable with. If you want to get into rentals, then why not start there? You can buy a place that needs a bit of cosmetic work (eg painting) and start there. Flipping is higher risk and depends on being able to hire good people to do the work or being able to do it yourself. If you are doing the work yourself, time is money.
The thing is I'm not COMFORTABLE with any of it...I haven't done anything like it before. My concern is that the rentals seem to take a longer time to generate long term passive income. I don't want to burn through cash while trying to get my empire up and running.
@Joe Villeneuve I like your idea of starting with flips and use profits for rentals.
@Account Closed
"flipping to generate cash" in today's market, when you've never invested before, is going to be very, very tough (unless you're super handy and going to do it all yourself, but I didn't see that you said this in your post). The best flippers have flipping businesses. They don't do a flip to buy a rental.
Do you already own a primary residence? Can you house hack? Can you house hack a light BRRRR like some others have suggested? That's a much lower risk strategy.
For some great videos on both flipping and BRRRR, check out Tarl Yarber's videos on the BP Youtube channel. He does high end stuff in Washington state - I'm not saying you should do what he does - but he explains the numbers, the process, the difference between the two, how he's adjusted his strategy in today's market, etc. The details are really great.