Decision: Flip it or Buy and Hold?

Question

I have a property under contract in Indianapolis and trying to decide if I should flip it or keep it as a rental.

What criteria do you look at when deciding between the two? Do you account for taxes in your analysis? Other fees like agent commissions or property management fees?

I’d like to build a model that would be easy to plug in a property’s estimated numbers and it tell me if it will be a better flip or buy and hold investment. Looking for your thoughts to consider while I build this out. Thanks!

Aaron W. · Answer

@Kenny Hall Decide whether to flip or buy and hold will depend on your investment goals and whether the property can perform as a flip and/or rental.

For me, I always invest to hold long-term. A successful investor I heard speaking once said: If you can't hold it, then flip it. If you can't flip it, then wholesale it.  This will give you a few options with each property you look at.

On the buy and hold side, taxes, closing costs (including commissions), repairs and maintenance, capex, insurance, and property management fees are always included in the analysis.

BiggerPockets has some decent calculators for buy and hold and flipping. This can save you time in building your own.

Best of luck!

Bonnie Low · Answer

I highly recommend DealCheck as a program to run your numbers. It is very easy to use, pretty customizable and pulls data right in from the MLS which can be a time saver if you're dealing with an on market property. As for flipping or holding, consider that your flip profits could be taxed as regular income (check with your accountant on this before you make a decision) which can make a HUGE impact if you're in a higher tax bracket. I do like the BRRRR method for the best of both worlds. If you're in an area that is appreciating, you can even consider a medium-term hold on the BRRRR. 1031 it in the next 3-5 years for example, into a larger property. Just another possible option for you.

Nick Giulioni · Answer

Hi Kenny, I'm a flipper myself. I would love to give you insights and share my thoughts if you're interested.

Jason Powell · Answer

As a rookie speaking, I am sure it depends on our overall investing goals, including current cashflow/income. But, my plan for 2022 is to do my first flip and acquire another multi-unit rental property. But, my duplex house-hack and rentals were probably a better choice for me based on my finances and other life pursuits when I got into real estate within the last 2 years. Good points about accounting for taxes and fees when making the decision. The BP calculators have been helpful for me.

Decision: Flip it or Buy and Hold?

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