Updated 3 months ago on . Most recent reply
Flip or BRRRR
New to real estate. Starting out, our available cash is limited. Currently purchasing a property that needs extensive rehab. Will be doing ~50% of work myself to save money (won't be doing foundation,roof, etc). I'm torn between rehabbing and renting with an estimated $400/month profit, or flipping to earn a potential $60k profit (before taxes). I would love to have more cash on hand to invest into the business but also would love to start having passive income. Thoughts?
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@Adam Copley We're investors in the mid west and I was in your shoes about 4 months ago. I completed about 20% of work on our property that's now listed for sale. Significantly less work than I've done on previous properties.
If you're aiming to flip you need a new roof. Unless that roof is < 5 y/o (verified with inspection) every buyer in this market will question it. Buyers are questioning everything so get prepared for it. Buyers are questioning new basement flooring jacks because "they don't match the old ones". We're providing an initial home inspection and sewer inspection/jetting video. It's a $1000 worth of inspections... for free. Unless the markets really heat up in the spring you'll probably want to provide these reports to stand out.
If you're aiming for a flip keep the BRRRR strategy in the back of your mind. Stay on budget with the flip BUT leave out expensive projects like a roof, windows, or major mechanicals that still have useful life (for a rental), so you can pivot into a rental. Every BRRRR could be a flip if especially if you're doing 50% of work. You're labor costs should be way less.
The labor costs for the property we just finished was $27k. These are 2bed, 1bath, 1car garage properties. We have completed BRRRR deals with a new roof for less money in the past, but it took 7 months to get done. It's exhausting but the sweat equity was created. That plan is not scalable with 9-5 jobs and kids, but if we can do it you can too. Cheers man.