All Forum Posts by: Pesi S.

Hello,

I am a  beginner and would appreciate  guidance from experienced advisors on what is a good strategy for real estate. Flipping VS rent and hold for say 4-5 years. Is flipping comparable to day trading in stocks ?  I have a opportunity to buy a 2 BR 1.5 bath condo in Charlotte in a Cash only deal. I am getting it at 48000 plus around 10000 in rehab costs and around 1000-2000 in purchase closing costs. My agent says we can flip it for around 85000 in 3 months. Sale related costs of commissions, closing etc will be in range of 7%.

The flip calculator on Biggerpockets gives me a pretax profit of 16000 or around 24% ROI. The calculator I believe does not take into account the expenses you can write off or any depreciation you can claim. Is 24% pre tax a good return on a flip ? I am told the pre tax profit for a flip will be taxed at your personal income bracket which could reduce the total profit by another 20-24%.

When I run the numbers and try to compare it with a rental calculator to see whether renting and holding for 4-5 years makes more sense I get confused. The Cash on Cash ROI is low around 7% as this is all cash purchase and the cash flow is around 370 per month. In the section where it displays Yea1 to Year 30 columnar report the "Annualized Total Return %" keeps on dropping especially after 1st year which is extremely confusing even though the Total Profit Value is increasing.

 I am confused on how to compare these numbers VS Flip numbers. I have attached the charts and would appreciate if anyone can guide me on this

Flip

Thanks a lot.