Would you try flipping or buy a 4 plex?

Question

I'm posting because I am stuck, I don't know which direction I want to go. I will have a decent amount of money early next year from a cash out refi and I wanted to buy a 4 plex or two and start earning rental income on those however I have always liked the idea of flipping houses. Would you flip a few houses first and use that money to put down on a plex or two, or would you just buy the 4 plexes and keep saving for more down payments? I ran 6 year estimated numbers on where I want to be and would have approx 120k more in 6 years if I held off buying the 4 plexes for 1 year and flipped 2 houses a year for a 20k profit each then using the profits to use as DPs.

Account Closed · Answer

I, like you, am a buy-and-hold investor who considered flipping to grow my DP pot. And if the right property appeared in the right neighborhood at the right time, I might still go for it. However, I have discovered that rehabbing as a professional activity pretty stressful. I wish I could do everything myself, then everything would be done the way I want it done and when I want it done- but unfortunately I have to get contractors do much of the work and they are not the most reliable bunch, to put it mildly!

Anyway- I have decided that I will focus my time and energy on finding good value-add buy-and-hold properties instead. It's slower, but less risky it seems to me. And I can continue to enjoy revenue from the property for year after year.

So- I vote for the 4plexes!

Santos Collantes · Answer

@Kuba F. easy...hilarious. So true in everything you said.

Santos

Kuba F. · Answer

@Samantha Klein To me it's the buying, creating value, and selling that gets me excited, so that's why I flip.  I like the short term of it.  If you haven't flipped before, but you've always wanted to, you could try an "easy" one before you sink your cash into the next long term project.  By easy, of course I mean the first one is the hardest and you're likely to lose money while learning along the way.  But then again, you could catch the bug.

Lee Lockhart · Answer

Hi. As a contractor,  flipping requires an enormous amount of time. Also, managing contractors is a skill-set that developed over time. I'm not sure of your market, but a rehab for flipping is different than a rehab for buy and hold. Although you want both rehabs to be professional and appealing,  potential home buyers typically pay more attention to repair details than renters. However as lease values increase, renters become more demanding as well. Whatever strategy you choose, just know your demographics and build the best property for your market and price it lower than your competition so you can get continuous interest...

John Casmon · Answer

@Samantha Klein Think that's a smart move. Nothing wrong with trying something new, just be sure to minimize the risks and lessen the learning curve in the process. Good luck on your next deal!

John Casmon · Answer

@Samantha Klein Your 6-year projection assumes you will make $20k profit on each flip. What if they run long, are overbudget and you lose money? Although, that never happens with first time flippers, right?!? In all seriousness, I'd suggest finding a successful flipper and investing in their next project. This allows you to learn the ropes and make a preferred return. Then you can decide if you want to go that path solo or stay focused on the 4-plexes. If you do decide to go this route, I have more tips on qualifying that "successful flipper" to help ensure you don't get taken to the shed.

Darren Budahn · Answer

I guess it certainly depends on your long term goals.  Look to buy undervalued rentals and you can keep on cash out refinancing, essentially getting most or all of your initial capital layout back.  If you can find these kinds of properties and add value, you won't have to wait months or years to save up for the next down payment on a rental.

Polar Prutaseranee · Answer

Flipping can be pretty fun, though =D

Would you try flipping or buy a 4 plex?

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