To Flip or short term BRRR? That's the Question

[Martin Sterling]

Flip vs BRRR

Greetings,

I wanted to know what you guys think about the differences in these two strategies when it comes to building up capital reserves.

Please correct me if these projections are inaccurate.

Situation A

If I buy a property for 80k, put in about 60k worth of work, and the ARV is 240k, that's a pretty decent deal. That's a 100k spread (240k minus 140k), out of that let's say you net 50k conservatively. If your project is under 12 months, short term capital gains is about 15k, so you pocket a 35k profit.

Situation B (a friend's deal)

You paid 88k for the property, you put in 37k, ARV is 270k. That's a 145k spread.

Instead of flipping for cash, you did a cash out/rate and term refi out of his hard money loan after 2 months. You pocketed 44k. No taxes due. And still had a single family home he rents for $2000. His PITI is $1600. He cash flows $400/mo. Not sure if that includes his down payment. His down payment was, 13.2k. He's still pocketing 30k in two months tax free from forced appreciation. He's not dealing with buyers negotiations and a second RE agent commission, buy it's still a second closing expense.

My question, what's a rule of thumb to use for deciding whether a property should be flipped or short term BRRR cash out?

Deals that fit this short term BRRR criteria seem to have larger spreads and high rents.

So when and why would you short term BRRR and not Flipping?

Any rules of thumb for deciding?

Thanks in Advance