You'll Wish You Had My Problem

:biggrin I live in the Midwest. We don’t see a lot of appreciation in real estate and homeownership rates are high. As a result, we have more than our share of foreclosures. This creates a great business environment for real estate investing. Last year, I flipped 2 and bought a 3rd as an investment and was lucky enough to find a decent tenant. My question is, given the economics of my area, what is the smartest way to invest? I’ve bought 6 houses this year, I’ll probably flip most if not all. It’s pretty hard (but not impossible) to rent here as the rate of homeownership is so high. My goal is to become wealthy (whatever that means). I only make 7,500 - 10,000 per flip, but I can find several a week worth buying. Should I keep flipping or hold some, and have marginal tenants. How can I really build wealth? Thanks for your input.

If its hard to rent them that’s already decided, don’t bother. Hold for appreciation doesn’t seem to fit (and frankly in most markets just plain risky). Seems like continuing to flip works for now. Maybe get some commericial space later on when you have more capital?

Btw, why the low profit on flips? Are homes just exceptionally cheap out there?

This is what I’d do …

  1. Flip several homes to raise cash for a down payment.
  2. Buy a home 20% (or more) below FMV and put 20% down.
  3. Sell home with owner financing (wrap/AITD) with a decent spread in rates.
  4. Repeat.

Thanks for the input. I’m thinking of doing that with one of the ones I bought this year. What has worked for you in terms of securing buyers, qualifying them, etc.? Do you have a lawyer do the paperwork? How do you keep it from being viewed as a purchase if they get behind, so you don’t have to foreclose? What % down should I ask for? Thank you.

And yes, Rich, homes are ridiculously cheap here, compared to the rest of the nation. That’s why renting really doesn’t work. If you got someone who is reliable and can pay the rent, they can just as easily buy. It’s messed up, but that’s the way it is. Thanks for your input.

What about multi-units, then? Duplexes, quads, and the like?

There are some duplexes here, but they are in pretty depressed neighborhoods and I’m afraid the tenants would be constantly moving in & out and not respecting my property. I guess the best thing to do is to keep flipping, but that seems more like an income strategy versus a wealth strategy.

Flipping is definitely more like a job, once you stop so does the money. If rentals are a bad idea and you want to create wealth you could take some of that flipping money and invest outside of the real estate money in stocks, bonds, mutual funds, etc.