Real Estate Investing for Beginners


21 thoughts on “Real Estate Investing for Beginners”

  1. when you use quick calculations, how do your numbers differ in your hold vs. flip? for example, in a flip, i would estimate $40/sf for rehab of existing living area of home and $120/sf for adding sf to home. if you were to consider rehab for rent what per sf number would you use. i’m assuming that maybe a % of cost of flip rehab psf would work better to share so that i could apply that % to my estimate for a hold. for example maybe the # is $30psf, hence a 25% (30 / 40 = 75% or 25% discount).

    any feedback would be much appreciated.

    Thanks!

    • Thank you for the comment!
      I don’t use percentages when I do my figures, I get a total figure in my head plus a little extra for unknowns that always come up. I would estimate 10% to 20% less for repairs on a rental than a flip. I also spend much less on repairs than $40/sqft on a flip or rental. I would estimate we spend $7 to $15/sqft on a flip.
      Some things I don’t do on a rental is I may not replace all the fixtures, windows, appliances, or doors. I also will try to get as much life out of a roof or furnace as I can. If those are questionable on a flip we will replace them.

  2. I am curious as to which route do you go when flipping a property since you are already a realtor… do you list the property on mls, or fsbo, or craigslist, or do you ever sale a flip thru an auction??? Just curious?

    • Hi Jimmy,
      Sometimes we will put up a for sale sign before we are finished with the repairs and see if we can get a buyer before listing it, but when the home is done we always place it in MLS. When we have sold a home off our for sale signs the buyers almost always have an agent represnting them so it hasn’t saved us any money. We have never used an auction, but lately we have had multiple offers and had to go to highest and best a few times. Since I am a Realtor the commissons don’t cost us as much as others who have to pay the seller and buyer side.

  3. Hello,

    Say I’m only looking for houses to gain a cashflow through rentals.
    What would determine if the house is good for renting out rather than flipping?

    If I’m in a poor country, do you think its a better idea to build a house and then rent it out? Or just buy one?

    When renting out a house, do you fix it up first (make it look good)? Would that raise the rent?

    • Hi Noaf,
      I go usually keep the best houses that cash flow as rentals. A lot goes into my decision including location, rent to price ratio, condition and more.
      In may area I can buy existing houses cheaper than I can new construction.
      I always fix up a house first

  4. Hi Mark, Great article!!

    I’m trying to buy my first house either to fix it and flip it or holding it for long term. I plan to get a loan in order to do this, actually I have it approved already, but happens that renting the house won’t give me any cash-flow since the loan payment would be higher than the rent.

    What would you recommend? Is it obvious that the mortgage is higher than the rent? or is it just that the market in which I trying to work is not good enough? I mean I know that mortgage payment is depending on how much I put as downpayment from my own pocket. I’m doing a 20/80 mortgage plan.

    Any information you could provide will be helpful.

  5. Hi Mark,

    I just discovered your website and all the info you provide is very helpful. thank you..

    I am about to change jobs and I’m considering cashing out my 401K to use for the purchase of a property. I should have about 50K after the 10% penalty and setting aside 35% for taxes.

    First, do you think that is a smart plan? And second, do you think my first property should be a long term rental or fix & flip? And third, what are your thoughts on a duplex or 3 unit building instead of single family?

    Thanks!

    Chris

    • Thank you Chris, I would run the numbers to see how much money you would be making on rentals or flips in your area to see if it is worth cashing out. There are some big penalites. I would also run the numbers on properties in your area to see which are better SFR or multi.

    • Hi Chris, I feel qualified to mention this to you because I do this and my wife is a CPA. Unless you already found this out, do not cash in your 401K, roll it into a self directed IRA with check book authority. If you do this you will not pay the 10% penalty nor taxes. Also you may be able to borrow against you 401K or in other words take some of the proceeds and return them without penalty subject to your 401K administrator rules. Assuming you can purchase the home for $50,000 then sell it, none of the income you make from the flip is taxable (no 35% in taxes). The tax is only due and payable when you retire and start taking the money out and based on when you take it out. Better yet if you can flip within a Roth-Ira you never pay taxes NO MATTER HOW MUCH THE FLIP BRINGS IN, IT IS ALL TAX FREE FOREVER! In fact anyone that is not flipping within a self-directed IRA is losing their shirt to taxes, because you pay the tax as ordinary income. You may have already found some of this information out, but flipping houses and being taxed as ordinary income will leave you with the smallest return on your investment. Don’t work hard . . . . . work smart. Michael Hickmott EquaTrust Properties.

      • Good information Michael!
        There are drawbacks to flipping in a retirement account. Mainly you can’t touch that money for so long without tax penalties. I imagine it is also much more difficult to use financing to purchase flips in an IRA which would limit the amount of flips you can do. If I can flip three houses with financing to every one without my return will be much higher even factoring in taxes and I have that money to use for other things if I want too.

  6. Have you ever done a rent to own? We’re currently renovating a house and trying to decide if we should keep it and rent it, or flip it. The realtor that sold it to us stopped by while we were renovating and said he has a couple that are interested in the house and using the rent to own option. Our potential profit is around $35,000.

    • I have never done rent to own yet. The problem I have with it is the real estate commission frowns upon it and most real estate lawsuits involve rent to own

  7. Hi Mark thank so much for all this information,I have 7 properties that I brought cash,I rented 3 of them.I have 1 that I live on it and the others 3 I didn’t fix it yet,I have the curiosity if fix in flip is it better then rent to hold,but now that I read all this I think that its better for me to rent then fix and flip cause I have not much experience in business.I would like that you answer me.

  8. Hi Mark,
    I would love to get into the business, just takes money to make money. Any interest in partnering on some properties in NY,NJ,PA Areas? Teach me your ways so I can flourish. 🙂 I know I have what it takes and the right resources.

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