Your strategy and how it has changed: multis, flipping, buying notes & tax lien sales

9 Replies

Hey everyone! My family and I have owned properties for many years and I have just liquidated several I inherited in order to invest closer to home.  Years ago I flipped a little but my comfort level has always been renting and buy and hold.  This is primarily because that is what know, that is what I was comfortable with.  I am starting to look at alternative ways of investing: tax liens, notes etc. and flipping. ( I actually loved flipping but if you saw my "handy work" on that property you would be glad a contractor purchased it.)  I am at a point in my life where I have the cash and collateral so have some options.  I also am in the point of my life where I am much more conservative, when I was younger I had nothing to lose I guess.  Anyway would love to hear how your strategies have changed over your time in this profession. 

My original goal was to build a rental portfolio for passive income.  However when I started prices were rising so fast not much made sense as a rental.  Why accept $2-3K a year net cash flow when I could wholesale it and make $20-40K. 

I believe in part your strategy should take in to account what the market gives you. 8-10 years ago it was easy money flipping and wholesaling. Now in The Baltimore market, Killer cash flow is what the market is giving if you. So I have come full circle and again am working on building a rental portfolio.

Do what is comfortable for you.  I have clients who are accumulating assets, so they are focused on appreciation deals (buy low, sell high).  I have others who already have accumulated assets and are concerned about generating monthly cash flow to live off of.  I recommend that that focus on accumulating enough assets so that you can generate enough monthly cash flow so that you can afford to live the way you want without having to work.

God Bless You!

Originally started with buy and hold, did a flip and made big bucks quick, but saw a shift in the ability of folks to get mortgages, so went back to buy and hold.  Love the fir$t of the month!!  Tax liens were good when I started, average payback was seven months, now at 18 months its great...

One of the most fascinating things I gain going to my local REIA meetings is seeing so many different strategies that work. Ultimately, I think it boils down to your comfort zone. Originally, I started out planning to flip, figuring a contractor background would be invaluable. However, over a few years, that has changed to strictly buy/rehab/hold multi-unit rentals because that has been my most successful niche. I don't think there is any right or best way, it is what you do well and like doing most.

Buy and hold is where it's at for me.

Yes, rehab-resell is quite profitable, but there are sooooo many pitfalls, so many potentially unpleasant surprises. I have never felt comfortable with that level of risk, though I have all the respect in the world for people who do it.

To me construction is always about fighting: for financing, for time, for inches of space, for quality workmanship and for the best materials at the price you can pay. While I'm sure people develop skills in selecting projects where risk is minimized, something can happen in the market--or even in the house next door-- that is completely beyond your control, and it can lose you everything you put into that project. 

Also I've found that it means a lot to me to take a vacant property and bring it back into productive use, even if it needs a moderate upgrade. I work with trustworthy who are accountable for their work and will use the help of a placement professional if necessary to be sure I get the right tenant.

For some reason making the property a safe, comfortable (and hopefully permanent) home for that person or family feels like a better way to direct my energy. 

And of course, there is the cash flow.

@Nancy Roth   How did you go about finding and purchasing your vacant homes? Have you found many that didn't need a ton of work, like a complete rehab?

Not being the spring chickens we used to be, @Marylyn B., we're not looking for any more work, and several of the options you mentioned are jobs (flipping, buying notes, and argh -- multi's). Forget tenants; as I'm sure you know, even managing property managers can be stressful and time consuming. We're slowly getting rid of everything that's not as close to NNN commercial as we can.

Commercial tenants don't enjoy anything near the protections as residential, are generally more sophisticated (I said "generally"), and with a strong lease, can be treated as bigger boys and girls responsible for most of your expenses. All of this equals less time, less work, and less stress if your buildings are in decent shape. It's not all hands-off though.

For our money now, nothing beats lending privately to residential flippers. After taxes, the returns are every bit as good as an investment property and the time commitment, in hours per loan, can be often be measured on one hand.

With any construction/flipping experience, which you seem to have a bit of, it's fairly easy to evaluate a property and I know of few other investments where the value of your collateral is improved as quickly over time. Once funded, any issues with the property remain with the borrower (as does all the profit, of course) so there are no midnight phone calls. Though not zero risk, private lending is a remarkably easy and time efficient business for us that I highly recommend looking into, if you're in that position.

Alternately, we are next looking at completely passive investments such as some real estate syndications with proven operators. I know several full-time, completely passive, cash-flow investors here that do this quite successfully.

To be more specific, developing some near and long term goals would probably help you decide a direction.

Good luck, Marylyn.


Oh, please. 

I can't tell you how to find the right house and the right deal for you, Tiesha, but I can tell you this: DON'T DO WHAT I DID. I trusted a slime-ball realtor, and thereby bought a terrible first rental house. 

What I would do differently today:

--Learn how to do the investment math, so you can do your due diligence. 

--Set some specific financial goals and don't ever forget them when considering a deal.

--Talk to a lot of people at real estate investor meetings, which I know you are doing. 

--Look for ways to be of help to someone who knows more than you.

One opportunity, if you are looking to buy in Baltimore, is to volunteer to help Ned Carey in the spring after the Baltimore tax lien auction list is released. He drives around for a couple of months looking at prospective bids. He could use help recording his bid estimates on the computer as he drives. What you get in exchange is his priceless observations on neighborhoods and investments in Baltimore. I don't know where you'll get a better on-the-ground education.

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