So this week in Memphis, I have heard many ads for a “House Flipping Workshop” that promises to teach every day people the strategies needed to make money in real estate investing. This return comes after a costly and lengthy time where blood sweat and tears go into your property. Today we are going to look at the differenced between flipping a house for profit vs turnkey rental property.
Let’s get down to some real details here to dig in and illustrate. (I’ll use some example numbers, so the exact numbers in each situation might differ but you’ll get the idea)…
Let’s say you have $50,000 and you want to invest it in real estate.
Here are 2 options for you:
You spend months trying to find a property that you can buy at a discount. Finally, you acquire a property for $40,000, you add $10,000 to it to force the appreciation, and then you try to sell for $90,000 (let’s get really aggressive to make some money, right? To get there, you’ve tied up your capital and have to wait for a return and, meanwhile any additional expense from the property is eating away at that anticipated profit of ($90,000 – $60,000) $30,000 anticipated profit. Plus, you have to find the money somewhere, since you invested it all up-front. Finally, you get an offer and by the time the offer closes, minus the carrying costs and such, you’ve made $20,000. Seems like a big chunk of money, right?
Oh, and to get all of that, you had to work your butt off: demolition, shopping, installation, problem solving, dealing with contractors, etc. Probably doing all of this on evenings and weekends so you don’t disrupt your job.
In total, it took you 6-8 months of effort, from acquisition to renovation to sale.
You call us and ask to invest $50,000 into a turnkey property. Within a week, you could own that property in your portfolio. A month later, you could get your first check — $650. A month after that, you get your second rental check in your account — $650. About two and a half years in, you pass the $20,000 mark.
Sure it took basically 2 years to get to the same amount, but now let’s compare the differences:
- Turnkey investing starts getting your returns right away.
- There is no demo, renovations, shopping, installation, or dealing with contractors.
- The returns are predictable – they’re not a big unpredictable hit all at once but they’re predictable month after month (or quarter after quarter, depending on what you have set up).
- With turnkey investing you’ll reach and surpass the equivalent ROI you’d get from flipping… but then you’ll keep going. In the example above: 5 years later, you’ll have doubled your returns. And it just keeps going and going.
- With turnkey investing you don’t have to devote hours upon hours of effort to get the return – this is a hands-off investment that funds your lifestyle rather than requires you to sacrifice your lifestyle to get it.
Is flipping “investing”? Some would say yes but I’d say no.
I’d much rather have controllable, predictable, ongoing cash flow that gives me the time to do what I want.
If you’re thinking about flipping, or if you’ve tried flipping (or know someone who has) and you don’t want to deal with that nonsense, give our team a call before you do anything. We would be happy to help you get a stress free turnkey property today that you can start getting a return right away.