Wholesale or Flip - As a NEW Investor, what would you do?

Question

Ok BP Community, I am brand new to the world of Real Estate Investing (and I need some advice). I recently became aware of a house near my work that MIGHT be acquired at a significant discount. I have seen the inside of the house and I know that it is in fairly good shape (although recent smoke damage probably means gutting the entire inside right?).

How do you decide whether to Flip or Wholesale a property?

I was going to try to Wholesale this property because I have heard this is the easiest thing to do for someone like me (just starting out in this business with very little money, and NO resources to buy the property outright) BUT there is SOOO much equity in this property that it almost seems like it would be a “no-brainer” to Flip this house. Is it crazy to try to do a Flip on my 1st investment? How hard is it to find Hard Money Lenders to accomplish this?

Also, IF I do decide to Wholesale this property, can the price be negotiated (or is there a standard percentage)? It seems silly to me to pass up a potentially HUGE “pay-day” simply because I have never done this before.

John D. · Answer

First worry about locking it up at a great price. Then you'll have great options. Until that's done, I'm not sure if it's worth getting bogged down on the wholesale v. flip decision.

Account Closed · Answer

Getting a good ARV estimate, and planning for time for repair and time to put up into the market. Also making sure you budget properly with room for a bit of mistakes. I think there's nothing wrong with starting with flipping, but be prepared to put in more work! In the end it will be well worth it.

Account Closed · Answer

Flipping for the first time alone is dangerous. It's best to find someone who has experience in flipping properties. I know of some hard money lenders that actually help first time flippers find an experienced flipper, so you can look around.

Flipping usually has more profit (if done correctly) than wholesaling. The basic to deciding whether to flip or wholesale is the property value after a repair compared to the purchase price. But different lenders have different basis for determining whether to go for flips or wholesale. Feel free to ask or message me specific questions, I'll be glad to help or find a co-worker of mine who has done a lot of wholesaling and flipping to help out.

Tino Julian · Answer

AWESOME Advice. Thanks everyone.

John D. - you are ABSOLUTELY right (it wouldn't be the 1st time I've gotten ahead of myself).

David Kang - thanx for the advice, the referral and your offer (I'm sure I will be contacting you as I begin to navigate this whole process).

Mindy Jensen - thanx for the advice on getting referrals & smoke remediation. I actually do KNOW how the fire started (the owner was smoking in an upstairs bedroom) so I BELIEVE the damage is fairly minimal (and contained) but someone I know said to me "oh, there's smoke damage, forget about it, the smoke permeates EVERYTHING and the only way to get rid of the smell is to gut the entire house (which is why I was worried).

CK Hwang - that you for validated what I was thinking. Yes, even if I "screw up" there should be PLENTY of $$$ left-over. I'll have to do a more detailed analysis as I move forward, but the house was bought in the 90's for 2 1/2 times LESS than what the low-end of the market is doing for that area (so it SEEMS pretty-well idiot proof to me).

Thank you EVERYONE!

CK Hwang · Answer

Given that there is a ton of equity in the property i would flip. Reason being that with a large cushion , there is plenty of "room" for you to make mistakes and it is not easy finding priorities that allow for this. I would instead wholesale deals off that are too marginal at this time for you to handle. As your processes get better and more efficient, you'll be able to take on deals with less margins.

Mindy Jensen · Answer

@Tino Julian, I got my start flipping houses. I don't think you should necessarily shy away from flipping just because you have never done it before. Do you know any contractors that you trust? If not, start asking everyone you know for a recommendation. A good contractor can help you understand exactly what needs to be done.

Smoke remediation isn't a super-hard thing to do. Kilz paint can take care of a lot of it. Of course, I don't know the extent of the damage, so I can't say for sure what it would cost or how far down you need to gut, if at all. Google Smoke Remediation companies and you get thousands of listings. They can give you a more accurate idea of what it would cost.

An ideal situation would have you viewing the home with the contractor and smoke remediator. Do you know how the fire started?

Before you make an offer, you need to have an exit plan. You mentioned wholesaling. Do you have buyers you can sell this to? You should have an idea of how much it will cost to repair and what it would be worth after repair, so you can sell it to others.

Wholesale or Flip - As a NEW Investor, what would you do?

Wholesale or Flip - As a NEW Investor, what would you do?

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