Fix & Flip or Fix & Hold?

Question

Hey everyone,

I’m curious to hear how you decide whether to move forward with a fix-and-flip or hold onto a property for long-term rental income. Sometimes, a deal looks great on paper for a flip, but as you dig deeper, you realize the numbers might not line up as expected. What’s your process for determining if a property should be flipped or turned into a rental instead?

Do you ever change your mind mid-project? How do you pivot if you’ve already started a flip but realize a rental would be more profitable in the long run? I’d love to hear your strategies and any examples of when you’ve successfully adjusted course!

Ryan Irwin · Answer

Agree with what @Jonathan Greene said above.  Also something to consider is what is the appreciation play looking like?  If you have a scenario that the area is being developed or other factors that indicate value should go up significantly in the future, it might also make sense to hold and refi your capital out.  For example, I have a property that was announced as a grant funding development for 2025, along with the need to buy neighboring lots to clean up the land.  By hanging on to the property as a rental and selling the lots, the future value outweighs selling right now.

Jonathan Greene · Answer

You should always run your numbers for both before you offer just in case something goes haywire on one end. Maybe renovation costs get blundered so the spread is too weak, but the appreciation and refi potential is there. Maybe something happens on the block which pushes rental rates down, but still provides a sale option. And yes, sometimes you have to pivot depending on other parts of your portfolio.

The issue is that a flip is higher end finishes and amenities than a long-term rental so you could overdo the market if you have to rent it and get less of a return for the finishes. You sit down and weight the pros of cons in the end. Some people hold it just because they won't make as much as they want, but then the market goes down and they lose more so you to know the sale and rental market as well as the trending nature of the area.

Zachary Deal · Answer

I think @Jonathan Greene evaluating both is spot on. The BRRRR strategy is always a great option, especially if you the liquidity to continue to purchase properties depending on how much you are recouping when you refinance. In todays environment with higher interest rates there are less buyers in the market than a few years ago so waiting several years until rates drop to a more palatable range could lead to much higher returns. Also, building a portfolio of cash flowing, appreciating assets is a great way to create long term wealth

Evan Polaski · Answer

@Deborah Wodell: for me it really comes down to deal flow and returns.  The upside to holding as a rental is, presumably, you have an income stream for a while, so you take reinvestment risk out of the picture.

I think if you realistically have enough deal flow of good properties, flipping is a faster way to a huge bank account, since a good flip should be between 30-50% return on investment every 4-6 months, if you are doing it all cash.  If you are financing, even higher.  But in reality, reinvestment risk is real.

In rentals, in today's market, there is basically no cashflow available after a BRRR and you introduce tenant risk into the equation and any longterm hold will have pretty continual maintenance.  Every 15 yrs HVAC, every 20 roof/kitchen/bath, every 5 flooring...  All this adds up to a lot of continual investment overtime.

So, I look at like this: a good BRRRR will almost always be a good flip.  A good flip will not always make a good BRRRR.  And BRRRR in general are hard to make pencil, primarily because rents in my market, while up, have not really grown as fast as overall property values, and the cost to finance is much higher relative to a couple years ago.

Fix & Flip or Fix & Hold?

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