Next Step After First Flip!?

7 Replies

Hello All,

Good News:

After some minor setbacks, including an AC leak in the attic that ruined a 5'x4' section of my ceiling two days before we were supposed to list on MLS, my first flip in Houston hit the market! I received a great offer five days later. While we are still in the option period for a few more days, I have a good feeling that we will close with this buyer. After all hard money fees and normal closing costs, I should walk away with about $30k (before taxes). I'll have to speak with my accountant of course but I'm bracing for about 24% in taxes which would leave me with around $23k.

About Me:

I have been in commercial property management for most of my career (I did a quick stint as a Realtor when I first fell in love with RE), so I was well prepared for almost every curveball this process threw at me. With a portfolio sale that includes my properties set to close on July 1st, I will be stepping into REI full-time.

My dilemma:

While $20k+ every few months would be great as a side hustle, this will now become my full-time gig and I couldn't properly support my family with that income. So I need help coming up with strategies to reinvest my profit from this flip! I've been contemplating switching my focus to wholesale deals for the next six months to pad my bank account for more flips/buy & holds in 2020. I could also take the profit and roll it into another deal that doesn't need a major rehab (I'd be using hard money again).

How would you guys go about investing that $23k for maximum return?!

If you want to scale the business to support your family then the number one thing you have to worry about is leadgen, and so that might be the first place that you look to invest that money, whether it's direct mail to pre-foreclosures or online ads.

Leadgen for wholesaling is more difficult than for retail sales so you could use your license and focus on on-market sales in the immediate future, while figuring out the off market strategy.

@William B. you should repeat what you just did and scale it. Of you did one you can do 2 then 4 etc.

Wholesale takes a consistent commitment to marketing spend to be effective and build momentum.

Retail flips are a great strategy. Some call it wholetailing but it’s retail. Buy direct from seller and list as is will very little rehab.

You are in a hot market where this strategy works quickly.

Honestly $23k is not a lot of capital to work with so if you're able to re-leverage that in another flip and allow it to grow faster in the next 2 years and created six figure gains then that's when you really want to reinvest into more passive income streams. 

What could you realistically buy using the $23,000 our of curiosity? What is the rental returns like?

Originally posted by @Kuba F. :

If you want to scale the business to support your family then the number one thing you have to worry about is leadgen, and so that might be the first place that you look to invest that money, whether it's direct mail to pre-foreclosures or online ads.

Leadgen for wholesaling is more difficult than for retail sales so you could use your license and focus on on-market sales in the immediate future, while figuring out the off market strategy.

Thank you for the input!

Originally posted by @Greg Dickerson :

@William B.you should repeat what you just did and scale it. Of you did one you can do 2 then 4 etc.

Wholesale takes a consistent commitment to marketing spend to be effective and build momentum.

Retail flips are a great strategy. Some call it wholetailing but it’s retail. Buy direct from seller and list as is will very little rehab.

You are in a hot market where this strategy works quickly.

 Yes, that's the awesome thing about doing this in Houston right now. Things usually turn around quickly! I will think I'll try the retail strategy and cap rehabs to 5k-10k.

Originally posted by @Lien Vuong :

Honestly $23k is not a lot of capital to work with so if you're able to re-leverage that in another flip and allow it to grow faster in the next 2 years and created six figure gains then that's when you really want to reinvest into more passive income streams. 

What could you realistically buy using the $23,000 our of curiosity? What is the rental returns like?

With a "good" hard money loan, you can find a rehab with an ARV around $150k with 23k in the deal. Rentals vary by area like every other city of course, but I've been able to locate some "1% rule" properties floating around town.

You could also potentially pick up some subject-to deals.  Not many, and maybe nothing with a ton of equity, but you might find some.

Flipping is not something I would ever want to try to depend on to earn a living (this was my plan in the beginning, that changed quick).  Like you said, you might do one every now and again, but you would want to first ensure that you have enough cash flow generating properties or other streams coming in to keep you afloat.  Having reserves is so important.  Ask me how I know.