Looking to flip to support my buy and hold addiction

11 Replies | Houston, Texas

I currently exercise a buy and hold strategy, but have decided to do a couple of flips in between rentals to generate extra working capital. Obviously a flipping strategy is going to be different from buy and hold, including the search and selection process. My HML lender suggested to me to look in my own neighborhood, kind of like a wholesaler. It sounds like solid advice but I haven't done any wholesaling in the past and need a little insight that would play well in the northwest area; I live in Cypress. One of the biggest questions I have is once I find a property that has the signs of a motivated seller, how do I find out who the owner is?

Are there any neighborhoods in Cypress that I should definitely stay away from for flipping purposes?  Also, I am open to dealing with a local wholesaler if the right deal comes along, can anyone recommend one?

Any and all help is appreciated.

finding out who the owner is is easy. look on the county site to see where the taxes are sent. taht is a good address to send a letter saying "i would like to buy your property.". also the recorders website will have a copy of the deed and mortgages, if any, on the property.

i have a question for you taht i have been wondering. maybe the other people that will respond can explain. what is the difference between flipping and wholesaling? sounds like the same thing. in flipping you actually want to fork over the money and hold the title but in wholesaling you would not hold the title? what do you mean by flipping? as far as what areas to stay away from i have no idea. never been to texas.

Wholesaling in a nutshell is selling a secured sales contract on a property.  For instance a wholesaler could secure a contract on a property for $100K, doesn't close on the property, but instead sells that secured contract to someone with a markup, say $110K, netting a $10K profit.  The person the wholesaler sells the contract to will close on the property, as well as pay the closing costs.  A flipper buys a property with the intention of renovating the property in some manner and then selling for a profit.  A wholesaler basically sources the property for an investor and receives a "finders fee" for their work once the property is closed on by said investor.

@Paul Zofsak , if your lender will cover your next purchase for the purpose of rehabbing before flipping, won't you be tempted to just hold/rent it - again!?

Maybe first off, check your existing portfolio to see which property already has the most equity and/or worst rent return ratio, and flip THAT one?

If your borrowings already represent too high a percentage of the value of your properties, perhaps it IS time to rejig your purchasing strategies? Cheers...

@Paul Zofsak , your definition of a flipper sounds like a rehabber.  How would you define a rehabber then? i've just heard a lot about these flipper investors and didn't know exactly what they do.  to me a rehabber buys a house fixes it and then sells it.

A flip is when you purchase a property, and then turn around and resell it within a short period of time. Most flips are rehabbed, however not always. If you purchased a house at a steep enough discount, then you could just resell it without doing any work to it for a profit. 

@Brent Coombs that is a good thought.  I am pretty happy with the returns I am getting on my current properties.  The idea behind doing the flip is to raise capital to buy another rental instead of waiting for my current rental inventory to produce enough capital to purchase the next property.  I currently only have three rentals so it will be awhile before they produce some serious returns.

@Paul Zofsak

flipping to build capital for buy and hold investments is a great strategy. Cypress is a hot market and there will be plenty of buyers for your final product, but you will also have a lot of competition when you try to buy. What price range are you looking at? How will you pay for the purchase? As long as you run your number, and check sales comps, I wouldn't plan to avoid any neighborhood in the cypress area. There are buyers for every area and some of my highest returns have been on properties in lower income areas.