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The blog post Should You Start With Fix And Flips Or Buy And Holds? is courtesy of MPG Deals Fix And Flip vs. Buy And HoldWhen ever we meet people that are new to the Real Estate Investment business, we are often asked this one question, "should I buy and hold or fix and flip properties?". Well, there are a few things that you have to know and questions you must answer yourself before you choose. In this short article we will cover some info that will help you decide which path you should select. The very first thing you have to take into consideration is your finances, and the money that you are going to use in your RE business. If you have a 9 to 5 job and make really good money and have some money, 100k or more saved up, you can probably do either one. If you are an investor that has a significant amount of cash with a 9 to 5 the next thing you must consider is your skills for repairs and amount of time that you are able to devote to your investment. Time is a large factor, which we covered in the post "Tips For The New Real Estate Investor". Are you going to have time to oversee repairs for a fix and flip? Even if you have a buy and hold, it will eventually need repairs, so you will probably want to use the services of a property management company. Unfortunately, most people don't have that kind of cash put away, so their options are more limited. So let's move on to breaking it down for what we recommend for new investors with limited funds. Why Fix And Flip Investment PropertiesFor newbies that have a rather small sum of cash (20k - 50k) we always advise that you should do fix and flips before buy and hold. Why? Simple. By performing rehabs and quick turning these properties you will be able to quickly build a rather large sum of cash. Engelo Rumora just made a post in BiggerPockets.com that explains it the same way we see it:
We couldn't agree more with Engelo. We really like this model for people starting their own RE business and will really help people that are wanting to become a full time real estate investor. This could very well be an important part of creating your plan, which we outlined in "Tips For Becoming A Full Time Real Estate Investor". Another reason we prefer new investors start with fix and flips is because of how difficult it can be to find and keep good tenants. If you borrow money to purchase a rental and you don't have a tenant in it, you are loosing money! Asset Based Lending wrote an article back in February that explains:
While we totally believe in the fact that rentals can be a "cash-cow" like they outlined, we know that keeping good tenants in a property can be pain staking. High turn overs can lead to many repairs as well as lost revenue for properties being empty. Again, if you borrowed money to purchase a rental, then it will take you a long time to see real amounts of cash flow, most likely not until the property is paid off. Summing It All Up Unless you have access to ample amounts of cash, as well as a 9 to 5 job, we think it's best for you start with fix and flips. Build your cash reserves, then and only then, start using some of your cash to purchase rentals while saving some of your cash reserves for fix and flips. If you are in the market for either a fix and flip, or a buy and hold investment property, visit our site MPGDeals.com to find you next deal in Atlanta! Until next time :) via Blogger Should You Start With Fix And Flips Or Buy And Holds?
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