Are Investors Really Choosing Flipping Over Renting?

11 Replies

I know it's dangerous to generalize, but it would be interesting to know what the  BiggerPocket community thinks of the recent survey by Action.com that was posted in Appraiser News Online that states that real estate investors prefer to flip homes rather than hold them in a portfolio.  If replies include the type of properties you invest in (single-family detached, condos, 4-plex, etc.) and give a general market overview (population and/or real estate market conditions) readers can get a better idea of investment conditions.

I'm a little surprised to hear that as well. Not sure why - maybe I have more of a mindset of receiving cash flow as opposed to a chunk of money from a flip. 

I quick checked out the article and I think a quote to take note of is that the survey was 'a nationwide survey of real estate investors bidding on properties offered for auction during these respective periods.' Keyword there is bidding on properties for auction. I think that makes sense. Flippers need to get properties low so they can get the biggest return. I could be wrong but I'm presuming that 90% or more of rent ready homes don't end up being an auction type of deal but rather a more traditional sale.

I'm actually working on mobile homes - flipping them if necessary but selling them on financing. So neither one of your options really. Not a true flip and not a rental but I'm receiving monthly cash flow. Population in my area is around 230k with a three colleges in the area. The market is heavy with medical training, some influences from the Bakken oil fields although as that is coming to an end my area might be a place where people flock to afterwords.

@Steven Johnson 

Very good point. A nationwide survey related to real estate investors bidding at auctions is not a reliable indication of what real estate investors in a specific market like Moorhead Minnesota might do. During the height of real estate foreclosures I had the hardest time convincing people that nationwide trends were NOT what their local real estate market might be experiencing.  Thanks for the well-described local demographics and market conditions.  Are you sure your're not a real estate appraiser? Your writing style is quite descriptive. 

@Richard Sanderson  

@Steven J.  

I think you have to gauge the winds of your own investing market to look to trends. One contrarian trend in my main market is the lack of foreclosures. I don't like to buy from private parties. Banks are emotionless, steeped in percentages and cost/sales analysis. Banks don't feel a connection to a property. I know I am now moving to flipping as the best priced homes which make great rentals are drying up. I invest in SFR, by the way.

I should clarify....not abandoning rentals...just shifting focus a bit.

@Richard Sanderson  

IMHO The truly successful investors are always "Buy and Hold". They might start out with other things to generate some income/capital, but for the most part they majority of  investors with 8 figures net worth or more are buying and, ONLY selling case by case to improve the performance of their portfolios.

Garry Keller for his book has interviewed over 400 RE high net worth inventors (his book tittles the " Millionaire RE investor" I highly recommend to read it)  and in there you can read:

 pretty much non of the investors are "flippers" unless they do it to kill some time while focusing on "Buy and Hold"-ing their RE portfolio.

Good Luck to you!

Flipping can get you rich. Holding can make you wealthy. 

I used to flip when I was younger and killed it but I was always bummed when I'd see my properties resell for crazy high equity gains (the wealth part). My current strategy is to hold then continuously review my portfolio for possible refi or exchange options and also (later) rehab for highest/best use improvement options but those aren't flips. They're conversions based on improving my portfolio. They don't come until after at least 3 to 5 years into the seasoning hold process. 

Sorry for the delay. I forgot to subscribe to my own forum item.

@David Moore  I agree wholeheartedly that you should look at the trends in your own real estate market. There are just too many ways to categorize real estate and too many locational differences to use generalities.

@Val Csontos Your buy and hold strategy is well founded. When I think back to those who have acquired the greatest wealth in real estate in the communities where I valued real state, it was people who bought and held.  Many after the Great Depression and modern-day folks after the Great Recession. 

@Jim Gramata I'm very impressed with your strategy of improving your investment properties by rehabbing them 3 to 5 years after purchase. It's sort to like buying more of a well-preforming stock or bond - it's a known performer!

I prefer to get money in large chunks.  Once there is enough money saved up, buy some real cashflow.  Get a commercial building or apartment that brings in 50-100 K/year and then do it again.

We see both in our market. We prefer buy and hold investors (as I do personally) in San Antonio. I have seen an upswing in flippers for sure round here. 

I also know there is a really strong rental market in Indianapolis and Kansas City, according to my friends out there, more than flips. Varies by markets I spose!

I equate flipping and buy and hold to the goose and the golden egg. Flipping is the golden egg which gives a lot of cash one time. Buy and hold is the goose that keeps on producing cash. If you have several geese. it doesn't hurt to kill 1 or 2 off for the golden egg, but it's nice to have some geese in your portfolio too.

On the mark.  Unless your already rich you need the flips to be able to obtain properties to hold.  Last I checked you need 20 to 25% down for either hard money or private money.

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