I inherited a property that is in the process of being sold. Once the deal closes at the end of the month I am looking at paying off all debt and have the opportunity to continue investing in real estate in the sum of about $500k. My wife and I have a couple of rental homes which cash flow nicely. One of them is paid off and the other has a balance of about $60k. Other than our rental homes we are total novices in terms of flipping, wholesaling ect. but have read a few books, watched some YouTube videos and read a lot on this site. I guess I’m just trying to figure out the best approach to grow a business that will allow me to retire in about 10 years. With our personal home (paid off) our two rentals (valued at about $350k for both) and this lump sump- we hope to cash in our chips and live overseas and I’m seeking strategies on the best route to do that. Would you buy a couple more rentals in cash and put 20% down on another and let the extra cash flow pay it off and then maybe get another in a few years? Is it smarter to buy a couple wholesale, flip and then rent? Is wholesaling where it’s at? There is a realtor that works with a contractor that I met recently that could help us potentially flip to sell? Where would you start to grow a business that you could liquidate in 10 years if you had $500k? Thanks for any input and advice!

If cash is tight (even with $500k), financing your rentals will always make you more money than paying fewer off in full. Run the numbers on using $200,000 on buying 1 property outright, versus 5 down payments of $40,000. Leverage is power. We have 24 rentals (40 units). We see rentals as the bread and butter, and the flips as the gravy on top. Just be sure to account for taxes / capital gains up front when you sell your flips. We’ve done 4 flips… biggest lesson so far: cosmetic flips are where it’s at. Don’t bite off more than you can chew. We took on a 1925 house that has taken 4 times longer than a cosmetic flip that we will make the same amount of money in the end. Wholesaling isn’t our gig… but we will buy from a wholesaler. It’s probably more about your skill set though. You deal with a lot of crappy situations on either end of wholesale deals…. Divorces, death, bankruptcies … and usually the person selling their house is losing out, while you gain. it takes the right person to say, ‘that’s what I want to do every day!”We have been impressed with the appreciation in our portfolio over the past 3 years. We have some properties that we have sold for 2.5 times their purchase price in less than 2 years… like buy for $55,000, put $10,000 into the unit, and sold the property for $160,000 two years later! You can’t predict the future, but having a fleet of rentals has allowed us to sell a few off for some great profits! All the best! Randy

With regards to the debt portion of your concerns, I would suggest you read Robert Kiyosaki's Rich Dad Poor Dad book. He explains how there is "good debt" and "bad debt". To really cut to the chase, "good debt" is debt that makes you money, and "bad debt" is debt that doesn't (when you buy material things that just sit there). In short, if you could make $4,000 a month, versus $1,000 a month, you really have to ask yourself, "Why wouldn't I want to make $4,000 a month?" when your tenants are covering all the debt expenses associated with the properties. In addition, you get A LOT of tax write offs with real estate, including deducting the interest on the mortgages of the financed properties, so I would encourage you to work on rationalizing the idea that having a mortgage that returns positive cash-flow is actually a good thing. Every location is different, but we target $75,000 - $100,000 homes that rent for $1,000 a month. It's all about what is in your area. But the idea is to buy as cheaply as possible, and rent for the most possible. When we do that, our net return per financed property is about 1/2 of the total rents. It has really worked out well for us. Finally - know that property management will cost you 33% of your PROFITS on a financed property. So free and clear properties have an advantage there, but there just isn't that much to do in managing a small amount of properties. We managed 20 doors while maintaining full time jobs. By the time we got to that level, it was getting a little busier (and we had enough income to start quitting our corporate day jobs, but still nothing we couldn't handle (recognizing the amount of gain we were getting from it). It's all about systems. One of the best ones we found was "RentecDirect.com. It collects our rent, markets our properties, screens our tenants, tracks our expenses, etc, etc for about $4 a month per door. Can't say enough good things about it! All the best! Randy

I set alerts on Zillow as well as checking it 3 - 5 times a day As soon as a property comes up for sale that matches my criteria I have already thoroughly researched the area I google the agents cel number. Text them a photo of my drivers license and a screen shot of one of my bank account to show proofing funds. I tell them I want to put in an offer for $x no contingencies, no inspections close ASAP found a good one Friday I have it under contract Found another this AM have it under contract Gurus try to make things so much harder so you buy their books and courses Here is what a 30 second search showed me in Houston 2 BR 2 BA 90k lessit’s up to you to researching these are a go or a no

@Adrienne Binder If I had the capital and wanted to learn how to wholesale or flip, I would probably invest a little in myself and attend an event like Flip Hacking Live. The event is filled with successful investors and very transparent about the systems and processes they use. Also, I like @Frank Rodrigues' recommendation to consider commercial multi-units. Depending on your interest you could pursue that as an active or passive investor. If you invest as a Limited Partner (passive), you can earn pretty solid returns, take advantage of bonus depreciation to offset active income from flipping or wholesaling, and ultimately when you get ready to move overseas it's very passive so you can easily continue to invest in that strategy without any major adjustments. Cheers, Marcus

@Michael Plante Analysis paralysis is legit! Lol…

To me, syndication is a lot like the stock market. You put your money in, and you sit back and watch it. Hopefully it performs well. Hopefully the money managers (Sponsor / GP) are good and reputable. But much like Elon Musk tweeting on his airplane about taking his company private and then his stock tanking, you, as the investor are just a passenger on the plane and have absolutely no control over how things go, or what the people managing your deal will do. In addition, syndication necessarily puts layers of management / overhead in-between you and the maximum profits you could make with your money. While syndication probably offers a far better return than the stock market, it usually won't touch the return you can get from a self-managed property. So you have to decide what level of return you are satisfied with, and what level of work you want to do in a deal. For us, we are good with managing our properties. Anything we can't handle, a phone call can. If you like control, you will like self-managing. Sure, there are days where you say, "Man, can another thing break today... and then it will." But there are plenty of our units where we haven't seen our tenants in 4 years... they just pay their rent and time goes by. It's all a balance. All the best! Randy

How would you invest $500k to start flipping?

Adrienne Binder

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Rental Property Investor · Houston, TX · Member since 2020 · 22 posts · 14 votes

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@Wale Lawal Thank you so much for reaching out! What would be the advantages of the BRRRR method here in Houston compared to traditional flipping? I like the idea of buying, rehabbing and selling versus rehabbing to rent. We do have a couple of rentals back in my hometown (Victoria). They do cash flow well but there is a particular weight that I feel every time a storm is in the gulf or a freeze happens in winter or the rain won't stop… I guess the idea of getting in and out of flip projects every 45-90 days to get a return feels less risky I guess. I've been a bit traumatized by the weather events here in the last few years! Lol… but I'm very much interested in learning more about your strategy!

How would you invest $500k to start flipping?

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