Should I Flip or Should I BRRR?

3 Replies

In my first deal, I just closed on a 5 property purchase (4 single families and a 4 plex) and all of the properties have long term renters except 1 single family. The properties have been a part of a portfolio that has been grossly neglected over the years, and the rent reflects that. I am located in a small town just outside of Fort Wayne, IN. There is a large demand for rentals here in my town, but the supply is almost non existent and the current quality of rentals on the market is less than stellar (derelict houses rentIng for the 375-450/month). All this to say, there aren’t really any middle to high end properties are the market to rent. Which brings me to my actual question. The vacant single family needs a full rehab (which I have already done this to my own home) and I am wrestling with the strategy. Should I improve the property and use as a proof of concept to see if my market can handle a higher rent factor? Or should i flip the property and continue to roll the money into more properties and hopefully accelerate appreciation by improving the housing stock that is currently here? Thanks for your input! Taylor

@Taylor Klepper I try to let the numbers make the decision for me in these situations. There are lots of properties I own that I don't want and/or need to sell, but I think it is foolish not to at least consider selling anything at a certain price. 

Why not list the house at a price that would be a no-brainer to sell and see what happens? If nobody buys it then just use it as proof of concept and then move on to the next.

@Will Gaston thank you for your input Will. My struggle with that strategy is that my approach to level of finish would be a little different depending on the route that I take in finishing the property. If i am sure that I will go the Rent strategy, I would spend a bit more to put in more durable finishes such as tile flooring potentially higher grade countertops and casework, etc, compared to flipping. Just trying to make a decision prior to starting the project.

@Taylor Klepper Okay gotcha. I agree it's a better strategy to know what you want to do in the beginning. However, if you're still unsure, I think erring on the side of more durable finishes will give you both options (i.e. you'd still be able to sell it or rent it). Just a thought.