Flip vs. Buy and Hold — Indianapolis

The real estate world is in a constant state of flux, as we all know. After the collapse of the housing market in 2008, values plummeted and there were thousands of foreclosed homes, sitting empty.

Smart investors started snatching up those homes, at bargain prices. They knew the major dip in the market wouldn’t last forever. The collapse enabled them to fix up/rent out these homes, because the rental market surged, everywhere. I was fortunate to be interviewed by CNN online and USA Today about the phenomenon: click on this section to view the whole article.

Well, those days are over for the most part, as the housing market everywhere has had a nice rebound. Now, it’s a lot more difficult to find a home, do the updates/rehab, and make much money on the flip. Inventory is down, the market has tightened up. And on a flip you have to consider these cautionary tips:Most of the time, you run into unforeseen issues after you start the rehab.

  • It’s hugely important that you find a reliable contractor (if it’s not you) that will show up every day and complete the work on schedule.
  • Don’t overspend on the amenities/updates. Stay above the surrounding homes, but don’t spend crazy money you’ll never get back.
  • Be aware that the house may not sell immediately. And when the house sits, you continue to have all the carrying costs — insurance, taxes, utilities, maintenance , etc.

If you’re risk averse, flipping probably isn’t in your wheelhouse. Much safer to buy, fix up, rent out, and hold it for income and long term investment. Although I’ve flipped a couple along the way, I never depended on those “big returns” you hear about on HGTV and informercials. (They make it look way too easy!)

My best advice? Buy and hold here in Indy. Our market is super stable, and growing. Investors from all over the world are very interested in what Indy has to offer, with good reason!

So, You Want to be a Flipper?

Yes, it’s all the rage … reality TV shows like Flip This House, Flip or Flop, and even the one filmed here in Indy, Good Bones … they all make it look so easy, right? And the reality celebs reap incredible profits on all the sales. It’s no wonder I get approached fairly often by new investors who want to be flippers. I mean, what could go wrong????

When asked, I tell people the harsh reality of the flipping world:

  • When you estimate repairs/updates, there are always unplanned expenses and repairs that pop up. You should always pad your repair estimate to cover those unexpected surprises.
  • What if you can’t sell it immediately? What if it sits six months, or even more? You’re still carrying all your holding expenses, i.e. utilities, taxes, insurance, mortgage — slowly draining your eventual profit.
  • In a really tight, strong market, like Indianapolis (and many others), there isn’t a lot of wiggle room between what you can purchase a fixer-upper for, and what you can sell it for on the “flip side.” Bargains have gotten much harder to find.
  • Several of the HGTV celebrities have started programs/seminars you can purchase, where they’ll lend you money, teach you, get you set up, etc. How well do you think they know YOUR market? And many of their programs are 30K+ — crazy! I’m attaching an article that addresses the “business” of flipping and the pitfalls. It’s a good read.

Flip, Don’t Flop

My best advice would be to contact an experienced local flipper who might be willing to mentor you if you’re super serious about pursuing this route. Flipping houses isn’t guaranteed, steady income, and it isn’t for the faint of heart!