Is it worth it to Fix & Flip instead of Buy & Hold?

Question

I'm very seriously educating myself on real estate investment. I'm 25 years old with zero capital to work with and my ultimate goal is to build long term wealth (as quickly as possible).

I have heard that a minority of real estate investors Fix & Flip because the gains are taxed at the highest rate, greatly reducing the net profit. I understand the long game is to Buy & Hold, but I have no desire to be a landlord or continue upkeep on the property long term. The logistics of that seem nightmarish to be totally honest. I'd much rather renovate, sell, turn around and do it again.

All of that being said, if it truly isn't worth it for someone starting with nothing to Fix & Flip and I should really Buy & Hold for a few years of passive income instead, I suppose I am open to that. But I wouldn't want to do it longer than necessary. Does anyone with more experience want to weigh in?

Jason D. · Answer

@Victoria VanHouten if you dont have the desire to be a landlord, being a house flipper is a fine way to make a living. The advantage is quick cash, the disadvantage is that it's a job. When you stop flipping, you stop making money. Long term wealth cant be had by flipping alone, you have to find an investment that pays you an income so you arent always working for your money.

Ola Dantis · Answer

Account Closed wonderful advice: Flipping, in my opinion,  requires a particular type of temperament as you would have to deal with a lot of different and interesting characters from City Officials to CON-tractors (note the CON part).

Try your absolute best to set the foundation right and ask yourself the right questions such as why do you want to get into this business of Real Estate Investing? Am I willing to play this game for the rest of my life?

With a solid foundation, you are off to the races and you will win eventually!

For starters, you are in the right place 🤗

Good luck

Rick Taldykin · Answer

@Victoria VanHouten

Really depends on your investment strategy. As the others have said, F&F’s are for the quicker pay day, whereas B&H is long term — think ‘planting seeds.’

With the B&H strategy, once you get it cash flowing, you’ll have a steady stream of income on a hopefully appreciating asset.

If you can part with a chunk of cash and let it work for you, then the long term route would be better for you.

I personally invest in buy and holds. I save up enough to where I’m comfortable parting with and plant that seed.

Also, sometimes F&F’s take longer to rehab, longer to sell, thus delaying and likely affecting your projected ROI.

This kind of volatility can be overwhelming if not prepared for it.

Also, managing multiple F&F’s can be challenging, and sometimes hard to get away from if you’re anything like me and are tempted with a good deal.

I deal with investor borrowers on a daily basis and see an equal amount of B&H’s to F&F’s scenarios.

There’s no wrong way, it’s just how much you’re willing to take on.

Tony Kim · Answer

I think the easiest way to get started into real estate is to buy a 2-4 unit using an FHA loan which requires a very small downpayment and live in one of the units. I know you said you don't want to landlord, but to be honest, landlording is lot easier for folks starting out than flipping a home. I would perhaps start with a multi-unit house hack and see how it goes. If you still have the itch to flip, then I would look into doing that. You'll have a bit of experience in working with properties by then. Spend some time assembling a good team so that you'll be ready and also network with local brokers and investors in your area which will help you land a good potential property to flip.

The good thing is that you live in the Midwest and so you might be local to some properties with decent cash flow as well as potential properties to flip at a lower price point.

Sam Shueh · Answer

Suggest you get your credit near top(>780) and start saving now for downpayment.

Account Closed · Answer

Great advice, thanks! My credit is not too far away from that number, any ballpark amount on how much I need for a downpayment on my first house?

Account Closed · Answer

That's good advice. Would a regular old-fashioned investment like an IRA be a good alternative?

Sam Shueh · Answer

Conventional mortgage would require 20% down with no mortgage insurance and optimum interest rate. But some will take 10%+12-15K closing cost. Vets get a free ride. You also read about those with no money wanting sellers to financial or get investors to fund.

Is it worth it to Fix & Flip instead of Buy & Hold?

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