Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes
For those that both flip homes as well as rent (or BRRR), I'm curious what factors you consider when deciding to flip or rent.
Are there set criteria? Is it based on location? Is it based on age of home?
Thanks
Investor · Spring, TX · Member since 2016 · 25 posts · 7 votes
10y
I personally look at how much I would make on a flip vs. what the rental income to purchase price and repairs are. For example-
If I purchase a home for 80,000 and put 20,000 in repairs total cost of 100,000
I can sell QUICKLY(under value) in under 3 months for 130,000
OR
I can rent out at 1500/month, *after expenses* how long would it take me to make back that 30k?
For me, if less than a few(*2-5) years, I prefer BRRR because I should be able to still sell in a few years at an increased cost. I would actually make more money because of the rent, plus an increase in price hopefully. You would need to find your own comfort level and all numbers above are hypothetical and as an example.
However, if there are not many rentals in the area, I prefer to sale, because I may have a tough time finding someone to rent unless I drop the rental price. In that case, I would sell. Honestly, a reputable real estate agent or property management company could give you an idea of how long it would take on the market to rent or sale.
Investor · Spring, TX · Member since 2016 · 25 posts · 7 votes
10y
I personally look at how much I would make on a flip vs. what the rental income to purchase price and repairs are. For example-
If I purchase a home for 80,000 and put 20,000 in repairs total cost of 100,000
I can sell QUICKLY(under value) in under 3 months for 130,000
OR
I can rent out at 1500/month, *after expenses* how long would it take me to make back that 30k?
For me, if less than a few(*2-5) years, I prefer BRRR because I should be able to still sell in a few years at an increased cost. I would actually make more money because of the rent, plus an increase in price hopefully. You would need to find your own comfort level and all numbers above are hypothetical and as an example.
However, if there are not many rentals in the area, I prefer to sale, because I may have a tough time finding someone to rent unless I drop the rental price. In that case, I would sell. Honestly, a reputable real estate agent or property management company could give you an idea of how long it would take on the market to rent or sale.
Real Estate Agent · Saint Louis, MO · Member since 2016 · 17 posts · 22 votes
10y
I agree with @Westley. I think I would take it a step further. Here is my process when evaluating Rent or Flip. In my opinion this is the first thing to do on every single property.
1. Determine the lowest amount you can purchase the property by reviewing the current comps in the area
2. Determine what the comps of the top properties in the same neighborhood (within 1 mile). Make sure you use the same square footage and type of home (don't compare a one story with no garage to a two story with garage for example).
3. Determine the difference in #1 and #2. If the difference has enough room to do the renovation (similar to the features in the highest comp you found in #2) AND get profit then it is a flip. (You may need to add another step to determine the renovation budget, but you seem pretty smart so I think you can figure out a good ballpark guess here) If there is just enough to do the renovation? Move to step #4
4. Determine how much rent you can charge by contacting a property management company or a site like rentometer.com (This is where Westley's advice comes in).
For clarity, here is an example.
Property Price = $100,000
Highest comp = $250,000
Estimated Renovation = ???
But you have $150K to work with in this example. So depending on how much you want to earn (and how much needs to be done) this may be a good deal. Say the house just needs a new kitchen and baths. Maybe you can do this for $50K? How much profit would that be? (Score!)
Investor · La Grande, OR · Member since 2014 · 194 posts · 176 votes
10y
Hi @Account Closed,
My biggest factor is what I am looking for at the moment. Meaning, why would I sell an income producing asset to make $30K, if I don't anything to do with that $30K. I rehabbed a house in the spring with the intent to rent, but a great commercial space came up when I needed the money. I chose to sell and put the income as the down payment. I just finished rehabbing another home that I was planning to sell, however an opportunity to rent it out to a state agency above market rents came available, so I will hold onto it as a rental.
Having $100K in the bank is awesome from flipping houses, but if all you are going to do is purchase other cash flowing homes with the money, then why not it BRRR it from the start.