Buy, fix, rent VS Buy, fix, sell

General Real Estate Investing
1

I am going to be making my first investment purchase within the next 6 months. The hardest decision for me has been whether I buy, fix and rent or buy, fix and sell.

My parents are small time real estate investors (they hold other businesses or work elsewhere). I asked them for advice and they were very adamant: Buy, fix, rent. They argued that the real estate “game” is control, so the longer you control, the more you win. They also feel that selling to make money is too much of a hassle.

These opinions are very strong, but still, they do not have enough cash flow to make real estate investing a full time career.

I would love to make real estate investing a full time career at some point in my life, so I thought I’d get more opinions.

Is it better to make my very first purchase a buy, fix, rent or a buy, fix, sell?

Also, when should I consider buying land and building a new house?

Additional info: I live in the Hudson Valley, New York area. We are still experiencing decent increases in property value, but there are many houses that have been on the market for close to, or over a year. New houses seem to sell faster. A member of my family builds houses.

2

well it boils down to what you want. holding creates long term wealth, while selling increases immediate cash flow.

are you happy with your current job? Can you stay there until you have enough rentals that cashflow enough to support you?

3

Yeah, I’ve got a pretty decent job and I’m in my early twenties so long term wealth is more important to me, but what I have seen is that rentals do not give you the cash to start bigger investments. Are there ways to get around this?

Thanks for your response Judd, it’s starting to put things in perspective.

4

This is a debate that really only exists because there are lots of people out there, making money by buying, rehabbing and selling - and most are doing it by the seat of their pants or they have been doing it for a long time, have corp entities they operate through and really know what they are doing.

Your name dictates that you really do not know much about the “business” of real estate. I’ve read alot of the former posts on this site and I recommend you do the same. Clearly you are not ready to make what seems like such an easy decision. It’s either A or B to a person like you. Really, alot of the people on here have gone through that phase. But a choice simply between A - buy, fix and sell or B - buy fix and rent is not that simple dude.

Along with choices A and B are a multitude of decisions that must be made prior to you even thinking about the bottom line - exit strategy. You could of course, start with the simple decision and go through the questions to be answered and then at the end match the pros and the cons of each. What I mean is, no matter what, you must take into account many variables such as

Cash - do you have any - without it, your exit strategy will change drastically with every property you look at.

Market - do you really know what’s going on

Contacts - who do you know, how long will it take for you to get to know the right people who can help you

Costs - of fixing, holding, selling, managing and compare this to Cash

Asset Protection - what entity(s) will you hold property in - this is a loaded catagory that is not as simple as people make it out to be. Don’t throw around terms like “S-Corp” or “LLC” so carelessly - these are entities that you must understand before just starting one up.

Local Laws - Zoning, municipalities, taxation, and contacts to public offices - do you know any of this in your area, other areas?

CPA and Lawyer connection - You need these two. Know anyone who’s in the business - if they’re not in the business then they’re out of the loop (ie don’t get a ambulance chaser to conduct your closings or represent you in re tranx).

That’s just skimming the surface.

Good luck.

5

???
Your name dictates that you really do not know much about the “business” of real estate. I’ve read alot of the former posts on this site and I recommend you do the same.

-Thank you fo that advice, I will read previous posts.

Clearly you are not ready to make what seems like such an easy decision. It’s either A or B to a person like you. Really, alot of the people on here have gone through that phase. But a choice simply between A - buy, fix and sell or B - buy fix and rent is not that simple dude.

-I am a novice so I really don’t think it’s an easy decision. Your advice on thinking about my exit stratergy is great and extremely important, but I think I should re-phrase my question:

To everyone who would like to share: Was your first real estate investment a rental or a rehab and sell?
What influenced your decision?

6

Was your first real estate investment a rental or a rehab and sell? What influenced your decision?

My first deal was rehab to retail. It was the difference of realizing $250,000 in equity or making a couple hundred dollars a month renting. The only properties I keep for renting is medium-sized commercial properties after rehab. Small commercial and residential properties are sold immediately because the couple hundred or thousand dollars a month isn’t worth it to me.

My residential and small commercial rehabs from acquisition all the way through the final sale run on auto-pilot so to me it’s no different than owning a rental with a property management company, except the checks are bigger.