Flip vs. Buy and Hold

People from near and far contact me regarding buying flips, or buy and holds here in Indianapolis. Having been in the rental business for over 25 years now, I’ve had experience in both worlds.

I started with the idea of buy and hold, for income and long term investment. That strategy has been really good to me. At one point, I owned and managed 29 units near downtown Indianapolis. They were a mix of single- and multi-family homes. Even throughout the housing collapse and beyond, my rental properties stayed full. I also obtained my realtor certification, so that I could help other investors (and non-investors) find and buy properties. Because my real estate brokerage has gotten busier, I’ve sold a few of my personal rental properties, but I still own and manage most of them.

I’ve also gone the route of flipping a few times. Here’s what I see as the challenge of being a flipper:

  1. First and foremost, those HGTV shows aren’t realistic! Somehow, they manage to make really good money on every purchase/flip. That just doesn’t happen very often in the real world, regardless of where you live.
  2. Secondly, people tend to believe the rehab is going to take “X” number of days and cost “X” number of dollars. Beyond that, they also believe they’ll get it on the market and sell very quickly. (After all, that’s how it happens on TV.) Well, it RARELY happens that way. During the rehab, additional issues are often uncovered, which means more money and time spent. And when done, what if the house sits? Two months, three months, six months? All of those “carrying costs” fall on the owner — utilities, taxes, insurance, etc. And sadly, they watch that big profit they planned on disappear.
  3. Lastly, in this market today, there’s not much “room” for profit between the purchase and rehab costs, vs. the ARV (after repair value) and actual profit made after paying a realtor or giving someone a finder fee for locating a buyer.

If you’re planning on being a flipper, go into it aware of these downsides. With either option, educate yourself thoroughly before jumping in … you’ll be glad you did!

Onward and upward … 😊

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