To Flip or to BRRRR?

6 Replies

Hello BP Fam,

I am about half way into the rehab of my first deal and wanted to reach out to the community and gather some opinions. Before I get into the numbers, I will say that my long-term investment goal (the why) is to gain passive income through long-term buy-and-hold rental properties in order to supplement a military pension in ~10 years. I am open to flipping houses to raise capital to put towards more/better long-term buy-and-holds.

The current property I am working on technically works for both a flip and a BRRRR, although it has less than desirable cash flow in a less than desirable (for me anyways) class C neighborhood. There are a few things that give me pause for BRRRR'ing this house: cash flow, tenant base, neighborhood. The HUD was built to support delayed financing in the event I decide to go that route, thanks to @Alexander Felice for sharing his deals! Part of me just wants to flip it, add an extra ~$10-$15k to my working capital and move towards a small residential multifamily property for a better cash-flowing BRRRR. Please let me know what you think, here are the numbers and BP Calculator snippets. 

Purchase Price: $35,000

Renovation: $43,725 (includes 10% overage) 

ARV: $105,000 (Will likely list for $110,000 comps support it)

Rent Prices: $900


BRRRR



FLIP


hard to say

I'll tell you this, you're in this house for more than I'm in any of mine that rent for the same amount....

Ask yourself how easily you can replicate this property, the easier you can replace it the more you should lean towards flip, the more limited inventory is the more you should lean towards hold. 


@Alexander Felice good point on the replication perspective. I think I'd be able to replicate this scenario, or a better one for a buy and hold. This being my first one, I probably over rehabbed. I could've got away with less of the flashy cosmetics to rent at the current market value. Thanks for your input!

Try renting it, see if it works out for you. Sell in a couple years if renting isn't your thing. Relatively low cost house for you to learn landlording with. Versus learning to be a landlord on a multi-unit rentals with higher cost and more moving parts.

Originally posted by @Justin M.:

@Alexander Felice good point on the replication perspective. I think I’d be able to replicate this scenario, or a better one for a buy and hold. This being my first one, I probably over rehabbed. I could’ve got away with less of the flashy cosmetics to rent at the current market value. Thanks for your input!

 Very common! You'll def get better but inventory in Fayetteville is also getting more scarce. 

Either way, I think you have the best possible problem ;) ;) 

@Andrew Schrader thanks for the response. I should've included some more detail. While this is my first BRRRR | Flip, it's not my first rental. I've owned another rental property for about 3 years now. However, that rental property is managed by a property manager which is how I plan all my rentals to be run. Maybe I've been fortunate but I haven't noticed much physical, emotional, or financial demand from that rental. I'm not sure if that counts as a real landlord experience. I've toyed with the idea of putting the place up for rent at a number that makes sense and sale and the same time and seeing who bites first. I'm also exploring the lease to own options, but I still have some more research to do on that front. Do you have any experiences with lease option to buy contracts? I see there is a section in the forums on it, I plan to do some research this weekend.

I don't have any experience with lease options. I only have traditional buy and hold propertie.

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