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

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

Account Closed
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
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.

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  • Account Closed
    Real Estate Agent · Chattanooga Tn. · Member since 2024 · 46 posts · 15 votes
    2y
    Quote from @Account Closed:
    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. 


     You couldn't go wrong with single family either. Especially in one of the B class areas in Chattanooga. I have contacts with contractors' property managers and lenders. If anything about the Chattanooga market sfu or mfu, interests you. I'd be happy to get you in contact with the services providers I work with. They would be happy to answer any questions you may have.

    0Reply
  • Account Closed
    OP
    Member since 2024 · 16 posts · 9 votes
    2y
    Quote from @Account Closed:
    Quote from @Account Closed:
    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. 


     You couldn't go wrong with single family either. Especially in one of the B class areas in Chattanooga. I have contacts with contractors' property managers and lenders. If anything about the Chattanooga market sfu or mfu, interests you. I'd be happy to get you in contact with the services providers I work with. They would be happy to answer any questions you may have.

    Thank you for that! Let me look into it further, that may be something we’re interested in. I very much appreciate it.
    0Reply
  • Tanner Lewis
    Lender · Austin, TX · Member since 2021 · 448 posts · 441 votes
    2y

    I'm a big fan of having multiple exit options: if the deal makes more sense to flip, then flip it to increase your cash reserves. If it makes sense to hold onto, then refinance it as a BRRRR. The more exit strategies you have, the lower risk your investments will be.

    2Reply
  • Account Closed
    Real Estate Agent · Chattanooga Tn. · Member since 2024 · 46 posts · 15 votes
    2y
    Quote from @Account Closed:
    Quote from @Account Closed:
    Quote from @Account Closed:
    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. 


     You couldn't go wrong with single family either. Especially in one of the B class areas in Chattanooga. I have contacts with contractors' property managers and lenders. If anything about the Chattanooga market sfu or mfu, interests you. I'd be happy to get you in contact with the services providers I work with. They would be happy to answer any questions you may have.

    Thank you for that! Let me look into it further, that may be something we’re interested in. I very much appreciate it.

     Your very welcome, anytime! And best of luck to you!

    1Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    2y

    I would go with both. Some deals make more sense to BRRRR (particularly with things like mid-sized, lower middle class properties) whereas others are much better to flip (like for example, large, high-end properties).

    I think long term you want to own some properties, that's how you really build wealth. But flipping and BRRRRing at the same time are absolutely not an either/or proposition. 

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    0Reply
  • Zander Kempf
    Developer · Honolulu, HI · Member since 2018 · 111 posts · 93 votes
    2y

    If you're talking about your parents retirement money, I would go the safest route possible and divide that money between a few different experienced operators syndications / funds. That way you tap into decades of experience, and some diversification across deals.

    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    2y

    Ok @Account Closed I got 1 word for you: Nashville. 

    I think you're nutz to go from 0 too flipping, but if gonna go play, Nashville. But I say DON'T flip yourself, find someone in the market killing it and become a financial backer. Private $. 

    Reality is you won't learn to flip yourself without making some pretty big mistakes, mistakes that cost $, maybe all you're $. The path to becoming a proficient flipper is a veritable graveyard, most fail, that's the un-marketed reality. 

    So "hack" it, hitch your wagon to the right "Rising Star" and enjoy the rewards together. 

    3Reply
  • Account Closed
    OP
    Member since 2024 · 16 posts · 9 votes
    2y
    Quote from @James Hamling:

    Ok @Account Closed I got 1 word for you: Nashville. 

    I think you're nutz to go from 0 too flipping, but if gonna go play, Nashville. But I say DON'T flip yourself, find someone in the market killing it and become a financial backer. Private $. 

    Reality is you won't learn to flip yourself without making some pretty big mistakes, mistakes that cost $, maybe all you're $. The path to becoming a proficient flipper is a veritable graveyard, most fail, that's the un-marketed reality. 

    So "hack" it, hitch your wagon to the right "Rising Star" and enjoy the rewards together. 


     Good advice, thank you!

    0Reply
  • Peter W.
    Member since 2020 · 351 posts · 329 votes
    2y

    Unless you have construction experience you are likely to end up in the red on the first project or two.

    If you are intent on trying to do rehabs (which isn't necessarily a bad plan because that is where forced appreciation and higher returns are) then you don't need to make a decision on BRRR vs flip now, you can wait until the rehab is finished and figure out what makes sense to you. I would lean towards rental because as they say it's not what you make, it's what you keep. But depending on your market and the property location and quality there might be more money in flips—this is a location and market dependent question.

    0Reply
  • Ashley Madalone
    Investor · Smyrna, DE · Member since 2024 · 15 posts · 10 votes
    2y
    I don't know if I'd use the $400,000 to flip or BRRRR as an "intro" to Real Estate investing for someone who is looking for cash now as well as generational wealth.

    You could use the $400,000 as leverage into a $2,000,000 property that cash flows $20K+ per month.  Wouldn't that solve her desire to live large now and leave a legacy?
    1Reply
  • Account Closed
    OP
    Member since 2024 · 16 posts · 9 votes
    2y
    Quote from @Ashley Madalone:
    I don't know if I'd use the $400,000 to flip or BRRRR as an "intro" to Real Estate investing for someone who is looking for cash now as well as generational wealth.

    You could use the $400,000 as leverage into a $2,000,000 property that cash flows $20K+ per month.  Wouldn't that solve her desire to live large now and leave a legacy?

     I mean… when you put it that way. Certainly could. 

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Ashley Madalone

    I may not be understanding what you're proposing... but there is no $2M deal that nets someone $240K a month.  Maybe with no debt on it... but if you're putting $400K down, you have debt...

    0Reply
  • John Mason
    Member since 2024 · 1k+ posts · 351 votes
    2y

    If I were you I would start with https://www.coachcarson.com/building-wealth-one-house-time-j...

    0Reply
  • Ashley Madalone
    Investor · Smyrna, DE · Member since 2024 · 15 posts · 10 votes
    2y
    Quote from @Nicholas L.:

    @Ashley Madalone

    I may not be understanding what you're proposing... but there is no $2M deal that nets someone $240K a month.  Maybe with no debt on it... but if you're putting $400K down, you have debt...


     I think you misunderstood.  The deal was 20% down ($400,000) for a $2,000,000 property that cash flows at 1%, which is $20K a month.  Not $240K a month!  Lol, I wish!  

    0Reply
  • John Mason
    Member since 2024 · 1k+ posts · 351 votes
    2y

    Never a good idea to put all in one basket..if you see the forums you will see great risk mitigation strategies

    0Reply
  • Ashley Madalone
    Investor · Smyrna, DE · Member since 2024 · 15 posts · 10 votes
    2y
    Quote from @Account Closed:
    Quote from @Ashley Madalone:
    I don't know if I'd use the $400,000 to flip or BRRRR as an "intro" to Real Estate investing for someone who is looking for cash now as well as generational wealth.

    You could use the $400,000 as leverage into a $2,000,000 property that cash flows $20K+ per month.  Wouldn't that solve her desire to live large now and leave a legacy?

     I mean… when you put it that way. Certainly could. 


    That's what makes real estate investing so profitable, you can use your own little money as leverage into bigger deals than you would be able to afford on your own. That's how long-term wealth is created. Honestly, with Flipping and BRRRR, you don't even need to use your own money.

    0Reply
  • John Mason
    Member since 2024 · 1k+ posts · 351 votes
    2y

    Frankly if I were you I would connect with very experienced investors here , get a JV and partner with a few deals and get some money out and a lot of knowledge and also attend a few meetups etc.. RE wealth is usually built over a span of 5 years ..

    0Reply
  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    2y

    neither, be a lender 

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Ashley Madalone

    that was a typo, I meant $240K a year.  you're calling it 'cash flow.'  but that's just gross rents.  i know this a  hypothetical property but the point that I was making was that if a new investor buys a random $2M property with $1.6M in debt, they will be cash flow negative.

    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    2y
    Quote from @Ashley Madalone:
    Quote from @Nicholas L.:

    @Ashley Madalone

    I may not be understanding what you're proposing... but there is no $2M deal that nets someone $240K a month.  Maybe with no debt on it... but if you're putting $400K down, you have debt...


     I think you misunderstood.  The deal was 20% down ($400,000) for a $2,000,000 property that cash flows at 1%, which is $20K a month.  Not $240K a month!  Lol, I wish!  


     Yeah.... So this whole idea, what immediately comes to mind is Saturday morning cartoons. Remember, where while-E-coyote is in roller skates, and then straps rockets to the side of em..... And takes off to catch road runner, blasts straight past, face first into a cliff aaaand "splat"..... 

    Yeah..... That.... 

    There is such a thing as progression of knowledge, capacity and capabilities. Going from 0 too rocket-skates is a recipe for bad outcomes, "splat".  

    2Reply
  • Account Closed
    Miami, FL · Member since 2024 · 7 posts · 1 vote
    2y

    Sarah, I would be happy to help you analyze the deals. I am also on the same boat investing for my parents and it comes with a huge responsibility. I have learned a bit with over 20 years experience in real estate development and being a 4th generation real estate investor, but I am always careful. Unless you know how to run analysis, mitigate risks, account for contingencies, and have good strategies in place, you can end up worse than you started. I'd be happy to help and have a look at the numbers to see if they make REAL sense. 

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @James Hamling

    yep. put a number with a $ in front of it in your post and lots of folks on BP are more than happy to help you spend it =)

    3Reply
  • Steve Iaco
    Member since 2019 · 15 posts · 1 vote
    2y

    @Bob Stevens

    Where can one do that?

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    2y

    About the only thing I would do today is buy a nice home for cash in my back yard under market value that I could easily repurpose into a duplex.  Lots of nice homes with longer DOM and price cuts. 

    Know density rules at your state and local level.  Some make it much easier than it used to be to plex a home. 

    Flipping is just a job with higher risk, high taxes and high transaction costs. 

    And using debt, even a 1st position heloc at <50% LTV can and will notify you of this 'for your records'...

    1Reply
  • Twannisha Jackson
    Rental Property Investor · Cleves · Member since 2023 · 132 posts · 82 votes
    2y

    BRRR

    0Reply
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