Should I do Fix N Flip ?

Question

Hey, I have $80K-$90K liquid money. Interested in investing in real estate

I have experience of 2 years which I did wholesaling

My goals are to increase capital + accumulate properties.  Would love to hear suggestions

Jackson Ebersole · Answer

Hi Omri,

If what you want is to acquire some real estate, I would recommend using that equity as a down payment for a property that needs to be rehabbed. I wouldn't use all of the funds on the down payment and closing costs but keep some of it to get the rehab started, as most private lenders will give you funds for the rehab after part of that rehab is done. Let me explain that better, imagine your rehab is $100k, you would need to do part of the rehab, maybe $10k, and then you can get the funds for those first $10k reimbursed so you can keep progressing with the rehab.

Given your experience, I would recommend you start with a moderate or light rehab, mostly cosmetic work so that you can do it yourself and won't get your profit decreased by hiring third parties. Also, private lenders will be happy to give you funds for small rehabs and that will help you build a portfolio of rehabs so that they feel comfortable to fund larger rehabs for you in the future.

We're a private lender, if you have any further questions I'll be more than happy to help you with those.

Regards,

Jackson

David Spurlock · Answer

Hey Omri,

It's great that you have been doing wholesaling to get into real estate!

If you take the route of fix-n-flip, you'll accumulate capital but not properties. The BRRRR strategy sounds like what you are going after. Building capital through forced appreciation while still holding the property.

My advise to you is to not using your full 80k to do a renovation but instead start off smaller (30k-40k). The primary benefit of a smaller  renovation is you'll have a larger safety net if the renovation gets out of hand, the property won't sell, or if it takes longer than expected to rent. I would read into BRRRR strategy and see if that fits your goals.

Evan Polaski · Answer

@Omri Avital, I would start by trying to talk to your investor contacts that were buying your wholesale deals.  Personally, I have found that no wholesaler ever presented remotely accurate numbers (rehab estimates were well below my actual costs and ARVs VERY aggressive).

That being said, as others noted, if you have the capital and desire to learn, there is very little to do but actually start.  I would certainly start by talking to lenders, since $90k does not go very far in many markets, especially if you need to both buy a house and rehab on that budget.

As for BRRRR, there are certainly benefits to doing this, and a good flip (in a lower end area) should create a good BRRRR, if you can't sell.  But, it certainly adds some layers to the equation.  Not only do you have all the same analysis of a flip, but add to that the long-term hold and being a landlord piece as well.

Greg Cavaioli · Answer

Hey Omri,

You are in a good position to take that step in Fix N Flips. Your background in wholesaling seems to be a leg up for most 'new' investors. Do you have concerns that you are not detailing? If so, what are they? From there, you can weigh the pros and cons.

Should I do Fix N Flip ?

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