Starting out in Real Estate - Flip or House Hack?

Atlanta, GA · Member since 2017 · 15 posts · 4 votes

I am new to real estate investing and I am currently working at a big company earning a really good salary (just got out of school last year). I am interested in being financially free, but I am not sure how to start out. I am still living at home to save as much money as I can to start out in real estate. Should I flip a house to start out or do a house hack? Also, I work in the Sandy Springs (Atlanta) area and I am interested in keeping the property in the North Metro Atlanta area to save commuting time. Is the North Metro a good area to look in? Any recommendations on real estate agents to help find good investment properties to flip or house hack?

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Bradley LaBrie

Real Estate Agent · Davison, MI · Member since 2018 · 113 posts · 34 votes

As someone who started out flipping and transitioned to House Hacking, I would definitely agree with the people above. Don't get me wrong I made good money flipping but the risk is high and the learning curve is steep. Do a BRRRR house hack combo if you're wanting to do a renovation. I used the 203k loan to rehab a large project, house hack at the same time, and pulled out equity like I flipped it. Now it provides $2k a month in Cashflow 👍 and I continue doing that.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Justin A. I can't tell you about the area, but if you don't have a lot of time or experience, I would suggest house hacking first. Too many things can go wrong on a flip and if you are just starting out in your career, focus on that. Find a place where you'd like to live, but that also works should your move out later. See if you can find a duplex or something with a secondary suite to add more value.
1 Reply
Aaron H.
Rental Property Investor · Steamboat Springs, CO · Member since 2017 · 255 posts · 154 votes
6y
House hacking is one of the very best ways to get started. Usually lower risk than flipping, and keeps a roof over your head for cheaper than you can otherwise.
0 Reply
Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @Aaron H.:
House hacking is one of the very best ways to get started. Usually lower risk than flipping, and keeps a roof over your head for cheaper than you can otherwise.

What about the lack of flexibility and quicker time to profit that a flip provides?

1 Reply
Bradley LaBrie
Real Estate Agent · Davison, MI · Member since 2018 · 113 posts · 34 votes
6y
As someone who started out flipping and transitioned to House Hacking, I would definitely agree with the people above. Don't get me wrong I made good money flipping but the risk is high and the learning curve is steep. Do a BRRRR house hack combo if you're wanting to do a renovation. I used the 203k loan to rehab a large project, house hack at the same time, and pulled out equity like I flipped it. Now it provides $2k a month in Cashflow 👍 and I continue doing that.
3 Reply
Aaron H.
Rental Property Investor · Steamboat Springs, CO · Member since 2017 · 255 posts · 154 votes
6y
It depends on your goals. Do you need to generate more cash ASAP? Then flipping is a better bet. Do you want to invest for long-term cash flow and appreciation? Then you'd want to own the property long-term. Flipping is a job, a house hack is an investment.
Also depends on your risk tolerance. If you try flipping your first house and screw up, you could lose significant money. If you "screw up" a house hack, you're still usually way ahead relative to renting.
0 Reply
Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
Unless you’ve got a solid construction background starting out with a flip is a real good way to go broke. It ain’t like tv.
2 Reply
Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
Flipping first is the best way to lose your money by making poor decisions based on lack of knowledge or by making bad partnerships. You can house hack and mini-flip if you find a two-unit that you can rent well on one side and do some work on your own unit while you live there to learn a bit about renovation. Everyone I know who tried to flip first either overspent and got killed or underspent and got killed because they didn't know what they were doing.
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Bradley LaBrie
Real Estate Agent · Davison, MI · Member since 2018 · 113 posts · 34 votes
6y
@Jonathan Greene I can attest to over spending on my first flip! Good advice
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Cherie Orellana
Salt Lake City, UT · Member since 2018 · 219 posts · 182 votes
6y
House hacking is a great way to get started. If you are currently living at home for free perhaps you should purchase the home and keep as a rental as long as it cashflows. Another option as stated above could be kind of a long term househack flip. I think fixing a home you live in over 2 years then selling and avoiding capital gains is a great strategy as well.
You could also buy an owner occupied home with low money down and house hack purchasing another home every year and start building your portfolio. Just make sure when you purchase the homes it make sense as long term rentals once you move on to the next.
If you buy a home you can BRRRR you could refinance your money back out to put down on to the next each time.
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William Robison
Rental Property Investor · Dawsonville, GA · Member since 2019 · 16 posts · 9 votes
6y
@Justin A. I can see why you want to do a flip with the huge profit margin potential in sandy springs. I hope you have deep pockets though to help cover the cost of this in the springs. The Atlanta and metro atlanta area is a tough market with so much competition and the values so high.
House hacking is a great strategy. Generally you can afford more costly homes since you have more doors to rent out. And if you lose a tenant you’re not 100% vacant immediately.
The 400 corridor more specifically into Forsyth is projected to double in population by 2050.
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Daniel Sager
Rental Property Investor · Anchorage, AK · Member since 2019 · 39 posts · 13 votes
6y
@Justin A. I bought my first SFH at 25 and did a house hack/"slow flip" (didn't know at the time that house hack was the preferred term). I would suggest figuring out how many bedrooms you would need to at least break even on the mortgage + expenses. For me it was 5 bedrooms which was difficult to find in my area much less one that wasn't extremely expensive or destroyed. I found a great house that needed mostly cosmetic upgrades but made the mistake of using a renovation loan because the home needed a new boiler and electrical panel. I made good on the house when I sold it but I could have done much better had I used cash for the major upgrades.
I sold at 2.5 years to avoid capital gains and rolled my winnings into more of a flip at that point. I had had time to get comfortable with remodeling and knew what I was getting into (and also knowing what I had no business doing!).
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Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @Bradley LaBrie:
As someone who started out flipping and transitioned to House Hacking, I would definitely agree with the people above. Don't get me wrong I made good money flipping but the risk is high and the learning curve is steep. Do a BRRRR house hack combo if you're wanting to do a renovation. I used the 203k loan to rehab a large project, house hack at the same time, and pulled out equity like I flipped it. Now it provides $2k a month in Cashflow 👍 and I continue doing that.

Bradley, this is a great idea. I heard that the 203k loan is very hard to use and get people paid. Do you have any advice on how to effectively use this loan type?

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Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @Aaron H.:
It depends on your goals. Do you need to generate more cash ASAP? Then flipping is a better bet. Do you want to invest for long-term cash flow and appreciation? Then you'd want to own the property long-term. Flipping is a job, a house hack is an investment.
Also depends on your risk tolerance. If you try flipping your first house and screw up, you could lose significant money. If you "screw up" a house hack, you're still usually way ahead relative to renting.
Aaron, this makes a lot of sense! Thanks for your advice here! I will look to do a house hack next year. Would you advise going with a FHA loan and 203K loan or just going the standard bank loan route with the larger down payment?

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Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @Jonathan Greene:
Flipping first is the best way to lose your money by making poor decisions based on lack of knowledge or by making bad partnerships. You can house hack and mini-flip if you find a two-unit that you can rent well on one side and do some work on your own unit while you live there to learn a bit about renovation. Everyone I know who tried to flip first either overspent and got killed or underspent and got killed because they didn't know what they were doing.

Thanks Jonathan! I am definitely going house hack!
1 Reply
Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @Cherie Orellana:
House hacking is a great way to get started. If you are currently living at home for free perhaps you should purchase the home and keep as a rental as long as it cashflows. Another option as stated above could be kind of a long term househack flip. I think fixing a home you live in over 2 years then selling and avoiding capital gains is a great strategy as well.
You could also buy an owner occupied home with low money down and house hack purchasing another home every year and start building your portfolio. Just make sure when you purchase the homes it make sense as long term rentals once you move on to the next.
If you buy a home you can BRRRR you could refinance your money back out to put down on to the next each time.

Thanks for the input Cherie! Question for you: What do you mean by making sure it makes sense as long term rentals once you move on to the next"?

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Justin A.
OP
Atlanta, GA · Member since 2017 · 15 posts · 4 votes
6y
Originally posted by @William Robison:
@Justin A. I can see why you want to do a flip with the huge profit margin potential in sandy springs. I hope you have deep pockets though to help cover the cost of this in the springs. The Atlanta and metro atlanta area is a tough market with so much competition and the values so high.
House hacking is a great strategy. Generally you can afford more costly homes since you have more doors to rent out. And if you lose a tenant you’re not 100% vacant immediately.
The 400 corridor more specifically into Forsyth is projected to double in population by 2050.

Hi William, I don't know your background, but what area of Atlanta should I consider investing in for the highest ROI in terms of selling price or rent? Are you saying Forsyth?

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Bradley LaBrie
Real Estate Agent · Davison, MI · Member since 2018 · 113 posts · 34 votes
6y
@Justin A. well you’re definitely right the 203k can be administrative hell. The conventional loan has a similar one being the Homestyle renovation loan. Both have a lot of paperwork and steps, but in my opinion they’re worth it because the bank holds your hand through the process and ensures the project gets done right.
If you google “203k endorsement report” it will literally give you a list of the lenders that do the most of them in your market. If you actually find a lender that knows what they’re doing you’ll have a great time and it won’t be a huge headache 👍

1 Reply
Cherie Orellana
Salt Lake City, UT · Member since 2018 · 219 posts · 182 votes
6y
@Justin A.

What I mean is that once you move and you rent the entire property that it will still be a great investment and have cashflow. Sometimes a property can be a great househack investment when owner occupied but once you move those numbers change. Run the numbers both ways. As a househack and also as a long term buy and hold investment or flip if you intend to sell.
0 Reply
Nik Corbaxhi
Rental Property Investor · Stratford, CT · Member since 2019 · 154 posts · 115 votes
6y
@Justin A. Don’t be too greedy to jump on a flip without experience. Learn to walk before you can run. A miss-calculation on your flip can set you back a lot, and then you will really be missing opportunities for quicker returns.
1 Reply
Aaron H.
Rental Property Investor · Steamboat Springs, CO · Member since 2017 · 255 posts · 154 votes
6y
203K is great if you qualify, and like others have said helps limit risk on the renovation side. FHA is great if you can still cash flow with the higher monthly payment from having less down. Best thing to do is sit down with your lender and look at all the options based on your personal financial situation, then run all the numbers on the property assuming the different loan types and different rates/payments to make a final decision.
0 Reply
William Robison
Rental Property Investor · Dawsonville, GA · Member since 2019 · 16 posts · 9 votes
6y
Originally posted by @Justin A.:
Originally posted by @William Robison:
@Justin A. I can see why you want to do a flip with the huge profit margin potential in sandy springs. I hope you have deep pockets though to help cover the cost of this in the springs. The Atlanta and metro atlanta area is a tough market with so much competition and the values so high.
House hacking is a great strategy. Generally you can afford more costly homes since you have more doors to rent out. And if you lose a tenant you’re not 100% vacant immediately.
The 400 corridor more specifically into Forsyth is projected to double in population by 2050.

Hi William, I don't know your background, but what area of Atlanta should I consider investing in for the highest ROI in terms of selling price or rent? Are you saying Forsyth?

Justin that really depends on what you are trying to do honestly. If you want to flip houses you're going to work hard to find them with all the competition in the metro Atlanta area. Renting a house out with current house prices here is hard to cash flow also. House hacking is a way to get around this and helps with the ability to purchase more expensive properties and make them cash flow.
The biggest thing honestly for getting the highest ROI would be getting the best deal going in. That can be had anywhere. It's just about finding that deal and getting it.
Forsyth is projected to be growing a very large rate as the 400 corridor develops and expands. I live just above Forsyth. Could be a great place to buy and hold now, collect rent and sell one day for a large profit. Since you said you were in the Atlanta area I figured I'd let you know.

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