$400,000 To flip or to brrrr? Or both?

Member since 2024 · 16 posts · 9 votes

I have $400,000 to invest for my mother. She is older and would like to have an opportunity to have higher returns on her money at this point in her life. We were initially looking to flip homes, which would potentially bring higher immediate cash returns for her enjoyment in her later years, however I’ve been researching the brrrr method as well to generate cash flow without the stress that flip process may cause her. Supplementing her SS with rental cash flow income may be enough for her to go enjoy life to the fullest AND leave the legacy for her kids and grandkids after she’s gone (that’s also very important to her).
any thoughts, experiences and nuggets of wisdom are welcomed!

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Jonathan GreeneBusiness Member

Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes

You shouldn't do either of those with your mother's money unless you have the experience in real estate investing. Both of those models involve potentially comprehensive rehab to make a good return and new investors often hire the wrong people and spend way too much.

Higher returns on her money can be found in debt fund syndications which are totally passive and can pay 12%. If it's your mom's next egg, you don't want to take risk that is not fully educated.

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Kiernan LaFaver
Real Estate Agent · Central New York · Member since 2023 · 207 posts · 96 votes
2y
Seems like it needs to be determined what’s most important to her. Is it her enjoyment as a priority or is she primarily looking out for the family? If it’s primarily her, flip for immediate cash. However, brrrr, especially in stable areas can be consistent over the long term and for generations to come. Can you do two rental properties with the 400,000 in your market? If you can do two properties, that would be quite the consistent income stream PLUS building equity. If she’s like most grandmothers/mothers, she’d likely opt for the second one that benefits her a little in the meantime but her family greatly in the long run
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
2y
You shouldn't do either of those with your mother's money unless you have the experience in real estate investing. Both of those models involve potentially comprehensive rehab to make a good return and new investors often hire the wrong people and spend way too much.
Higher returns on her money can be found in debt fund syndications which are totally passive and can pay 12%. If it's your mom's next egg, you don't want to take risk that is not fully educated.
[email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
Zen and the Art of Real Estate Investing59 Reviews
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OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Kiernan LaFaver:

Seems like it needs to be determined what’s most important to her. Is it her enjoyment as a priority or is she primarily looking out for the family? If it’s primarily her, flip for immediate cash. However, brrrr, especially in stable areas can be consistent over the long term and for generations to come. Can you do two rental properties with the 400,000 in your market? If you can do two properties, that would be quite the consistent income stream PLUS building equity. If she’s like most grandmothers/mothers, she’d likely opt for the second one that benefits her a little in the meantime but her family greatly in the long run

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OP
Member since 2024 · 16 posts · 9 votes
2y
I like spreadsheets and numbers. I’ve essentially put together a comparative for her and, you’re right. Her main focus is mainly her family. She likes the brrrr method the most. Thanks for your reply!
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OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Jonathan Greene:

You shouldn't do either of those with your mother's money unless you have the experience in real estate investing. Both of those models involve potentially comprehensive rehab to make a good return and new investors often hire the wrong people and spend way too much.
Higher returns on her money can be found in debt fund syndications which are totally passive and can pay 12%. If it's your mom's next egg, you don't want to take risk that is not fully educated.

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OP
Member since 2024 · 16 posts · 9 votes
2y
The money isn’t her nest egg. It’s an inheritance. My mother‘s wish is to invest this inheritance in real estate. I’m simply trying to determine the best route to make that happen for her. I am assembling an experienced team. My role is to make decisions and delegate appropriately. I have an investor savvy real estate agent, a contractor with references and a good reputation, a number-crunching account as a husband. On top,of that, I sold my business and am essentially retired. I have all the time in the world. I don’t make a move without thoroughly researching and analyzing every possible outcome. That said, I do very much take into consideration the experience of people who are more knowledgeable than me, on whatever I’m endeavoring. If you have any pros and cons on flipping and/or brrrr that are perhaps rarely talked about or any other variables that should be taken into consideration, I’d love to hear it!
2 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Buy mix of BDCs, public debt, and private debt and relax. Don't play with senior money like a junior.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
If you've never flipped a home before, that is a huge risk for your mom to take. Higher returns are going to have higher risk. With interest rates where they are, she should be able to get a high yield savings account and keep her money save with a good return. Having the money to spend while also leaving it to the next generation is going to be tough.
If she's got her heart set on real estate, get her a solid rental where she can spend the rental income and when she's gone, the heirs can sell the house and do what they want with that money.
My mom (early 80s) just sold her house and bought a less expensive one-she put her left over money from the sale into a bank account with high interest.
3 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Account Closed:

I have $400,000 to invest for my mother. She is older and would like to have an opportunity to have higher returns on her money at this point in her life. We were initially looking to flip homes, which would potentially bring higher immediate cash returns for her enjoyment in her later years, however I’ve been researching the brrrr method as well to generate cash flow without the stress that flip process may cause her. Supplementing her SS with rental cash flow income may be enough for her to go enjoy life to the fullest AND leave the legacy for her kids and grandkids after she’s gone (that’s also very important to her).
any thoughts, experiences and nuggets of wisdom are welcomed!

Buy rentals with 10% or better net caps. With 400k you can get about 8 with seller financing. about 50k down per. I am closing this week on 2 more SF, PP all in under 100k, with 1300 - 1600 in rent,
All the best
2 Reply
Account Closed
Real Estate Agent · Chattanooga Tn. · Member since 2024 · 46 posts · 15 votes
2y
Multi-Family would be a good strategy and if you build the right team could be very lucrative
1 Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
2y
Every BRRRR should be a decent quality flip. Without experience either strategy is risky.
I'd put that money into something safe and get more experience before jumping in.
Cheers.
2 Reply
Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
2y
With someone without experience I would recommend buying a well maintained small multi family home 2-4 units in a solid A-B area.
Your risk is lower in this scenario, and trying to squeeze BRRRR and flips in this market is tight and risky. If you want to invest in RE, i'd play it safe.
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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
The beauty here is you don't have to necessarily choose which strategy you are embarking on for the first process of these strategies (buying a property in need of rehab and doing the renovations) - the best investors typically will have multiple exit strategies and can make unemotional decisions once the property is completed whichever way the numbers point to (flipping or keeping and renting/refinancing i.e. BRRRR)
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y
@Account Closed

it sounds like you have done quite a bit of homework and are putting together a team. that's great. but these are still very tough strategies for beginners in today's market. i just tried a BRRRR (my 4th) in a market i'm familiar with. the numbers didn't work when i went to refinance, so I sold it (as @Jaron Walling noted, it turned into a flip.)
it was a great project, i'm proud of it, i took a house built in 1900 that wasn't livable and brought it back to life, and i made a little bit of money... but it wasn't worth the time i put into it.

you asked for specifics so here's a comment and a question.

-if you do a BRRRR correctly, you likely won't get any cash flow. rates are too high. you'll break even on rent and get all or most of your cash back out when you refi. so BRRRR right now is an equity strategy, not a cash flow strategy. if you want immediate cash flow, that's great - BRRRR is just the wrong strategy for it.
-can your agent help you get off market deals? there are certainly exceptions, but in general, to flip or BRRRR you have to buy something distressed that is off market.
hope this helps
8 Reply
Brian Hughes
Member since 2024 · 3 posts · 2 votes
2y

https://www.biggerpockets.com/blog/how-to-become-a-hard-mone..

Find a local mentor. Find someone doing what you want to do, and doing it well. Educate yourself. What market do you want to be in? Have you considered MF acquisition?

My professional opinion would be seek stability first. You must assess your own risk tolerance.

1 Reply
John Mason
Member since 2024 · 1k+ posts · 351 votes
2y
Is this useful? https://partnerdriven.com/ There are reviews on here in the forum too
1 Reply
Account Closed
OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Nicholas L.:

@Account Closed

it sounds like you have done quite a bit of homework and are putting together a team. that's great. but these are still very tough strategies for beginners in today's market. i just tried a BRRRR (my 4th) in a market i'm familiar with. the numbers didn't work when i went to refinance, so I sold it (as @Jaron Walling noted, it turned into a flip.)
it was a great project, i'm proud of it, i took a house built in 1900 that wasn't livable and brought it back to life, and i made a little bit of money... but it wasn't worth the time i put into it.

you asked for specifics so here's a comment and a question.

-if you do a BRRRR correctly, you likely won't get any cash flow. rates are too high. you'll break even on rent and get all or most of your cash back out when you refi. so BRRRR right now is an equity strategy, not a cash flow strategy. if you want immediate cash flow, that's great - BRRRR is just the wrong strategy for it.
-can your agent help you get off market deals? there are certainly exceptions, but in general, to flip or BRRRR you have to buy something distressed that is off market.
hope this helps

I appreciate the comment and the questions. I understand it is a tough market, but the timing is the timing. So here we are.
Ultimately, having big cash flow isn’t terribly important in the short term. Would it be nice, sure but it’s not necessary. SOME cash flow is necessary for us to move forward with the deal, however.
1900s! wow, very cool. I do love old houses so much! I love to see them come back to life. Someday I would like to live in one. I won’t be buying any for investment though, not initially. Too many unforeseen issues.
I do have a great agent who is an investor herself. The rents are quite high in and around my area. I'm patient. I'm only going to move forward with the deal if the numbers make good sense. As you said, distressed is a must. As much forced equity as I can get out of a property, is the goal. Quality is important, but I'm not going to put more into it then I'm going to get out of it. I want single-family initially, no HOA's, good school district. I'll keep diligently searching until something comes along that we believe makes sense.
My mom and I started a business in California after we were told “don’t bother it’s an over saturated market“ and “it’s too difficult“. Well, we ended up being the most successful in our area. We sold our business and moved to Georgia following my husband’s job promotion.
My mom had me as a teenager so she’s young (relatively speaking ) very active and very capable, as am I. That said, she’s not at the beginning or even necessarily the middle of her life so we’re taking that into consideration.
The few pats on the head (not from you, thanks for that) I’ve been getting in this comment section is actually not a bad thing. We got the same reaction to our initial business plans in California and I have to say, nothing lit a fire under my *** more.

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John Mason
Member since 2024 · 1k+ posts · 351 votes
2y
I would look into getting into a Joint Venture with an experienced investor for a while and splitting profits on the deal using a structure
1 Reply
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OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @John Mason:

I would look into getting into a Joint Venture with an experienced investor for a while and splitting profits on the deal using a structure

Thanks for the comment. I’ll research that further.
0 Reply
John Mason
Member since 2024 · 1k+ posts · 351 votes
2y
You can post here and ask for a Joint venture partner
There are topics related to it like this one https://www.biggerpockets.com/forums/48/topics/997773-joint-...
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John Mason
Member since 2024 · 1k+ posts · 351 votes
2y
https://www.biggerpockets.com/forums/67/topics/1191453-how-t...
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OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Robin Simon:

The beauty here is you don't have to necessarily choose which strategy you are embarking on for the first process of these strategies (buying a property in need of rehab and doing the renovations) - the best investors typically will have multiple exit strategies and can make unemotional decisions once the property is completed whichever way the numbers point to (flipping or keeping and renting/refinancing i.e. BRRRR)

Thank you for the comment! You know, that’s what I was thinking. Coming to the end of a project running the numbers and asking myself if keeping or selling is the best way to go on that particular property.
Yes, I’ll save the emotions for my personal residence! The investment properties are all about the numbers.
0 Reply
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OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Bob S.:

Quote from @Account Closed:

I have $400,000 to invest for my mother. She is older and would like to have an opportunity to have higher returns on her money at this point in her life. We were initially looking to flip homes, which would potentially bring higher immediate cash returns for her enjoyment in her later years, however I’ve been researching the brrrr method as well to generate cash flow without the stress that flip process may cause her. Supplementing her SS with rental cash flow income may be enough for her to go enjoy life to the fullest AND leave the legacy for her kids and grandkids after she’s gone (that’s also very important to her).
any thoughts, experiences and nuggets of wisdom are welcomed!

Buy rentals with 10% or better net caps. With 400k you can get about 8 with seller financing. about 50k down per. I am closing this week on 2 more SF, PP all in under 100k, with 1300 - 1600 in rent,
All the best
That’s awesome! I’ll be mulling this over. Thanks for sharing
0 Reply
Account Closed
OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Account Closed:

Multi-Family would be a good strategy and if you build the right team could be very lucrative

I’ve been focused primarily on single-family, but I will admit it’s not based on any specific research. So, I would do well not to rule out multi-family. I’ll look further into it. Thanks for the seed.
0 Reply
Account Closed
OP
Member since 2024 · 16 posts · 9 votes
2y
Quote from @Alan Asriants:

With someone without experience I would recommend buying a well maintained small multi family home 2-4 units in a solid A-B area.
Your risk is lower in this scenario, and trying to squeeze BRRRR and flips in this market is tight and risky. If you want to invest in RE, i'd play it safe.
That is certainly worth entertaining. Thank you.
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