New investor thinking about fix and flip or rent if doesn't sell?

Question

Hi there. I just attended my first bigger pockets webinar yesterday, it was awesome. Anyways I'm a new investor and have about 100k to invest would love to get some advice and insight on the following. If I want to fix and flip a home and for some reason it doesn't sell at ARV price I want would it be a good idea to use it as a rental. What are some downsides and upsides to this strategy. Thank you.

Kp Singh · Answer

@Mike Higgins thank u so much I will for sure do that when I come across one.

Michael Fleet · Answer

@Kp Singh

It depends. It depends on what your goals are. Is it Cashflow? Is it flipping and keeping every 4th property to hold in your portfolio?

It’s always a wise business practice to have exit strategies in place in the event best case scenario is not available.

Mike Higgins · Answer

@Kp Singh I’m possibly doing that exact thing right now. I really take each property on an individual basis. For the property I’m talking about i planned to just flip it but after looking into it more, it’s in an announced “opportunity zone” with the city I’m in so the next few years they are focused on building that area up.

Now my idea is to finish the rehab and then refinance it and pull all my money back out (typicall brrrr) and then put a renter or rent to own person in it and hope for appreciation down the road.

If you have a deal you wanna talk through let me know. Always available to chat!

Kp Singh · Answer

@Noah Mccurley thank you very much. Great answers. Now just need to find a house that meets the numbers lol.

Noah Mccurley · Answer

@Kp Singh

Its a good idea to have many ways out of a deal. If you have run the numbers for both exit strategies and work out there is no reason you can't rent if it doesnt sell.

Dan H. · Answer

I agree with Alex's sentiment but will also add that the rehab will start to wear the moment a tenant is placed.  This in effect depreciates the rehab when a tenant is placed.

It is the same issue as purchasing a rehabbed turnkey.  The property will depreciate as soon as a tenant is placed because of wear on the rehab.

Because of this depreciation, it is important to refinance it soon after rehab if you are keeping it as a rental (BRRRR) so that you extract as much of your original investment as possible.

Good luck

Alex G. · Answer

The answer is no.  If you rehab a house for a typical homebuyer, you will likely end up owning an over-improved rental that is not tenant-proof.

Kp Singh · Answer

@Kyle Mccaw got it thank you very much.

Kyle Mccaw · Answer

@Kp Singh Until you know what you're doing, you need to get all the information prior to close to limit your risk.

Kp Singh · Answer

@Kyle Mccaw great info thanks. When am I or do I get bids for the repairs after I close or can I get them prior to buying? Or is that something I just need to guesstimate? Which I'd rather not do. I wanna be successful doing this and be able to support my family.