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Subject Expert
Safe option? VTI or VOO
An $80k property with income of $1500 to $1800 per month feels highly unlikely. If it’s that high, it’s likely very high risk. Also, income =//= cash flow… they’re VERY different.
$30k property with $30k in renovations is unlikely to sell for much. Do you have any experience hiring contractors or managing renovations? If not, I can tell you you’re in for an adventure.
I go back to my original analysis. If you want “safe”, then VTI or VOO are your best options. Both of these options feel very unrealistic / risky at best
Subject Expert
You will absolutely lose money on your first flip if you don’t have any experience with contractors / trades. You’ll get overcharged, you’ll go over budget, and things will go wrong along the way, that’s basically a guarantee.
A $20k flip sounds like paint, flooring, and maybe some light fixture or faucet change outs. That’s a little hard to screw up, but I also can’t see how that’s going to increase the sale price significantly. Once you look at a $30k Reno, that sounds like redoing a bathroom or two, a light kitchen lipstick facelift, or other work that will require trades. That’s where you’re going to start to run into issues with scheduling, scope creep, and not doing things right.
If you buy for $30k and put $30k into renovation, then $80k is probably your break even price after closing costs, commissions, and holding costs. There’s 0 margin for anything to go wrong (which it will), run longer than expected, have supplies be out of stock, etc… especially if this is your first time working with a contractor or trades!
Unless you’re passionate about flipping and know it will probably take 2 or 3 flips before you learn how to do them efficiently (and/or until you find the right contractors or trades), I’d go the buy and hold route.
Subject Expert
I’m just curious where you can buy a duplex for $80k… especially that produces that kind of income clean… that’s a 22.5% CapRate… at those levels, private equity or institutional buyers would have scoured the market… so something has to be a miss… whether it’s condition issues, neighborhood risk, vacancy problems or inflated rent assumptions…
Flipping… it’s a messy business, especially if you’re inexperienced and especially in the distressed asset market… again, unsure what market you’re in… but if there was a market for it institutional money would have flooded the area… if you can get into it, my suggestion would be to buy on the fringes of a stable, in demand neighborhood or area… otherwise you just put $30k into a house that your sitting on for a while…
Subject Expert
In tornado valley or the rust belt maybe…
Doesn’t matter the individual transaction size… if they could allocate $100M for 1,500 properties producing 22% net… at least one firm or syndicate would jump on it… I have clients that manage multi-billion dollar portfolios and they jump out of their chair for a 6%-7% CapRate…
Either way, there’s some kind of inherent risk here that we’re not seeing… those are Ponzi scheme level returns…
If you can do it, great for you… maybe sell some shares of the company and go big…
Duplex rented out over a flip any day.
Build long term cash flows. The property appreciates over time as well. But realistically, a property for 80k will probably bring in 1000-1400 a month in rent.
All good unless the property is in Ohio!!
Why
The best entry for me and several friends has been to start when you’re ready to move from your current home (that you own). Don’t sell it. Rent it out. You likely have a low enough mortgage payment to make it profitable, especially when you convert it to a rental when filing taxes and benefit from the depreciation expense. I’ve done this three times and have even had enough equity to pull out a little more and buy additional properties over the years. I have 8 rental homes now with enough cash flow to fund my early retirement.