First Deal! Should I flip or rent it?

Question

I've been on BP for about 2 weeks now and have my first official offer in... the seller hasn't signed the contract yet so finger's crossed. So I ran the calculations for BRRRR and we'll cash flow about $200 a month (after refi). It was a cash purchase and then i'd like to refinance that money out into a new property. My business partner want's to just flip it. Here's the rub, Zillow predicts this neighborhood will increase in value by 17% next year. Have you ever heard of a number this high? Should I trust it and hold the property for a while or sell and make a quick profit?

Also, I created an LLC yesterday and am now about to embark on the REI journey!

Josh Norell · Answer

Sounds like the inspection for $400 is money well spent. Inspections are highly recommended for newer investors. Sounds like you would have lost money on this deal had you gone for it.

This situation is common. You really need to be in tune what work needs done on the property, rehab costs, and ARV to make an educated offer.

Alora Glaze · Answer

Your best advise on this thread: Don't trust ZillowFor some reason, in particular, Zillow does a horrible job at calculating ARV and appreciation in Indiana in general.If you're really trying to determine what the percentage of appreciate is happening in the area - you should be looking at comps within the last 3-6 months. If you don't already have a connection with a realtor in the investment field who can help run those real numbers for you - it might be best to find that connection and take a look at that BEFORE you start your rehab to determine what grade of renovations you need to do in order to hit your target ARV for the property and if it makes sense to flip or hold based on that ROI you'll receive in the end.Best of luck!!

Jaron Walling · Answer

Get through the rehab and get back with us. The numbers always change.

Unless you have multiple properties already you don't need an LLC. If you purchase in an LLC refinancing the property is much harder. The real estate market is in a dizzy right now. I don't trust any of the numbers Zillow spits out (zestimate, rental rate, appreciation). Comparable recently sold property is all that matters.

Jeremy A. · Answer

If there is one thing I have learned, that is to find your niche and master it. Flipping, BRRRR, and  buy and hold are three different niches.  Don't sell yourself short but make sure your numbers are conservative enough to cover all expenses to get the most accurate cash flow amount. My niche is to buy and hold, but it seems like you found your niche of BRRRR. Write down the positives and negatives of both with your partner. Draw up a 2,5 and 10 year plan and figure out which method will allow you to get to your end-goal the easiest. Good luck!

Aaron Lane · Answer

So to followup on my journey... Had an inspection done this morning and the AC had been stolen, the main stack for the sewer was cracked, the furnace wasn't functional, water was turned off, asbestos covered ducts, nob and tube wiring, leaking roof just to name a few things.  The purchase price was going to be $58,000 but with all these extras, it'll cost just that much to fix the major issues on an ARV of $100k.  Has anyone else had this similar experience?

I feel bad that I didn't see all these issues myself but also glad that i'm just out $400 for the inspection instead of thousands.

First Deal! Should I flip or rent it?

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