How Can Real Estate Investors Create Synergy Between Flipping and Buy/Hold?

I’ve met dozens of investors over the years who’ve been successful to varying degrees at buying, rehabbing, then selling real estate. Mostly residential, but not always. For instance, I once rehabbed a medical building. We did very well, though it wasn’t something that captured my fancy. After rehabbing all sorts of props, I unceremoniously retired from that side of the biz. And no, I don’t miss in the least. But I respect the heck out of those who do it on a regular basis with success.

There’s an option on the menu of the habitual rehabber of which many are unaware. It can be the catalyst for turbo charging the long term investment side of their real estate portfolio — big time.

Most rehabbers who’ve been at it more than a few years, end up with one or two long term investments for one reason or another. Sometimes it’s by accident, but often by design. Either way, it usually seems rehabbers eschew much of the long term for the short term profits to which they’ve become addicted.

But what if they didn’t?

Markets are different, as are results from one to another rehabber, but let’s say the typical profit for use in this post is roughly $25,000. Yeah, I realize some places that’s a ton, and in others it might be evidence of a major screwup, but we’ll use it anyway. We’ll reduce that figure by an estimated state/fed income tax hit of roughly 30% which ends with an after tax profit per rehab of about $17,500. We’ll assume our rehabber does this three times annually, sometimes four. Furthermore, we’ll assume they can separate about $36,000 a year from over $50,000 in profits, towards their long term investment Plan.

Today we’ll simply lay out the bare bones of the strategy. The next installment will then show in detail exactly how they might use this newly created synergy to very positively enhance their ultimate retirement income. (Classic use of understatement.)

Here’s out it works

1. Either through past profits or saving current profits, long term real estate income property is acquired, if not already owned.

2. Cash flow from all long term props are then directed toward the elimination of debt on just one selected investment. This would be the implementation of the BawldGuy Domino Strategy. (More on that later.)

3. Each year the investor must decide, based on number of rehabs projected and at what profit, whether to continue Domino Strategy or pause to acquire another property. (Domino)

4. As net worth and cash flow are both increased, another option is often created: All of the cash flow plus rehab profits can be utilized in the acquisition of more long term investments.

5. Constant review and tweaking as options expand.

When next we talk about this, I’ll use an anonymous but known (to me) rehabber/long term investor to illustrate how this works in real life and in real time. If you think your circumstances might fit here, gimme call or email me and maybe I’ll use you (anonymously of course) as the example.

What’s your story? Think you can do much better, but not sure why or how? Gimme a call at 619 889-7100, or email me through the Contact BawldGuy button up top, and we’ll chat about it. Have a good one.

Related posts:

1. Learning the Difference Between Flipping and Real Estate Investing
2. Understanding The Difference Between Flipping And Being A Real Estate Investor
3. Can Flipping Be Integrated Into A Prudent Purposeful Plan?
4. Real Estate Investors – Flexibility Is Paramount
5. Real Estate Investors — Austin Deserves Serious Attention — BawldGuy Wish List