BETTER: Renting Or Flipping? | Episode 98 - a podcast by Bryan Ellis - SelfDirected.org
from 2015-07-15T14:18:03
What’s the better investment: Rental Property or Flipping? Well, the verdict is in from a major real estate data firm. I’m Bryan Ellis. I’ll tell you what that verdict is, and it’s relevance for you, RIGHT NOW in Episode #98…
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Ahhhh yes… it’s a classic conflict among investors… Take a small bit of cash flow now and for years as a pacifier while you wait for big gains… or get in for the quick but substantial hit of profit by focusing on undervalued assets.
Yes, my friends, it’s the constant debate of whether it’s smarter to RENT PROPERTY or to FLIP IT. And our friends at CoreLogic have the answer, which is: real estate FLIPPING is definitely winning the day versus rentals.
And why wouldn’t that be true in today’s market? Real estate prices in much of the country is still undergoing a rather substantial rebound from the market carnage of 2007-2009… frankly, it’s the perfect scenario for real estate flipping, as the market itself is doing much of the work of bringing a profit for flippers.
Still, there’s more to the story. This survey was conducted among investors purchasing real estate at auction… both in live auction settings and in online auctions. And there were 3 different types of buyers identified in the survey: One-time buyers, Real Estate Investors, and agents or representatives of investors.
One-time buyers is the only group who preferred renting to flipping. It’s easy to see why: One-time buyers are inherently low-volume in terms of real estate transactions and frankly, it’s not plausible to be a flipper if you’re only doing it every now and then. That particular method of profiting from real estate doesn’t lend itself well to the casual investor.
But to those professionals and serious flippers… this market remains a truly stellar environment in which to generate rather substantial short-term profits. I guess that’s why, among real estate investors and those who represent them at auctions, the Flip vs Rental option is won by the flippers by a differential that, if it was a presidential election, would be a landslide.
There’s one large generalization that can be drawn from this study, and it is:
The MORE PROPERTIES a person tends to buy in a year, the more likely they are to be real estate flippers rather than buy-and-hold investors. In fact, people who buy zero or one property per year are more likely to be landlords by a factor of about 60 to 40. But that ratio reverses almost exactly the very moment a person buys their second property.
But overall, one thing is clear: Flipping is where the most money is being deployed among savvy, active real estate investors… and by a very, very wide margin.
Why?
It’s simple – there’s a lot of money in flipping. That’s not always the case. Look… I have a team of flippers that does GREAT work and are able to make profits in good times and bad times but, the truth is, sometimes it’s just EASIER to make money as a flipper than it is at other times. And right now – and I expect for at least another 2-3 years – flipping is in a real sweet spot.
The best evidence of that is NOT the CoreLogic report, which is just a survey that people say what they “intend” to do. The best evidence is the RealtyTrac report that analyzes quarterly real estate flipping activity. That report shows what actually happened… not just intentions. And that report shows some really amazing numbers:
First, it showed that the average GROSS profit for real estate flips that closed in Q1 of this year was over $72,000. Second, and just as importantly, it showed that the gross profit margin – sell price versus buy price – was over 35%. That means that it wasn’t mega-mansions that led to $72,000 average gross profits, but houses in the $100,000-$300,000 range… a much more palatable scale for most investors.
But all of that is nebulous and imprecise… the result of studies, and not specific deals. So let’s look at some specific deals to see what’s REALLY going on out there.
My Flip team closes 1-3 flips basically every week. One of the deals we closed last week, Barcelona Lane in Maricopa, Arizona, yielded rather typical results for my guys. That deal had gross numbers that absolutely exceeded the average gross profit and gross ROI numbers reported by RealtyTrac. But those are gross numbers, not net. The numbers that really matter on the Barcelona deal are these:
This deal was completed in 4 months – almost to the day. And it returned a total NET cash-on-cash return of 29.6%.
While this kind of result is far from atypical for my flip team, let’s face it… that’s an astounding result. If you got that result from investing in the S&P 500, that would be one of the 10 best years the stock market has ever seen. But that result is, thankfully, rather common for my flip team.
My point is this: There’s a HUGE amount of opportunity in flipping, but I do have a warning for you: Don’t try this at home. Flipping isn’t a game for amateurs. Flipping is a real profession. It requires a lot of knowledge. It requires having highly reliable team members to do the work. It requires having a real system in place to produce consistent profit. Most of all, it takes experience to know which deals really make sense, and which are ticking time bombs, just waiting to wreak havoc on your portfolio.
But you should NOT overlook the opportunity to get involved in real estate flipping… just not on your own. My advice? Work with somebody who has done HUNDREDS or THOUSANDS of these deals… don’t bite the bullet on your own. Better yet… work with someone who has that level of experience, and who will agree to compensation based on a percentage of the profits rather than contractor fees.
Where can you find such a team with vast experience and the ability to work with 3rd party investors such as yourself?
The answer is simple: Go over to S3Flip.com and I’ll tell you about a team who has done this a HUGE number of times… with an ASTOUNDING track record of success. Did you know that my team in Arizona has bought over 13,000 houses at the foreclosure auctions? We know what we’re doing… and have a vast amount of evidence to prove it. So stop by S3Flip.com to check it out.
Look, this isn’t just me telling you about my flip team. This is PRESENT DAY REALITY, my friends. A huge part of my goal for this show is to connect you – the Self-Directed Investor – with great options for self-directing your investment portfolio. The answer to “what’s working now” is not always the same. Flipping is not always the best choice. Right now, it makes a huge amount of sense.
And so in just a few weeks, I’m holding a live event in Phoenix called the Passive Property Flipping Summit, where I’ll gather investors together who see the promise of “Outsourced Flipping” – where you provide the capital but have no other responsibilities – and I’ll introduce you to my team, help you to understand our process, and show you how to participate in this very lucrative opportunity, without having to be a real estate flipper yourself.
So if you’re interested, stop by at S3Flip.com because my friends, flipping is what’s working now. Not only does the survey from CoreLogic show that that’s where smart money is being deployed, but the analysis of over 17,000 flips done in Q1 of this year by RealtyTrac show the numbers undeniably: There’s very big opportunity in flipping right now… and the absolute best way for you to be connected to it is to see the “Outsource Property Flipper” training over at S3Flip.com
Oh… if you’re qualified to attend – which means you’ve got at least $75,000 of liquid capital to deploy – then the Passive Property Flipping Summit is free for you to attend. But it’s basically full already. I’m down to 15% capacity. So check it out right now if you’re interested at S3Flip.com.
My friends… invest wisely today… and live well forever!
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