Why I DON’T flip houses (revealing my favorite real estate investing approach)

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Even though I’ve had the opportunity to flip the homes I’ve bought, and even though I’ve represented my own clients who’ve flipped real estate for massive profits, this is why I’ve preferred NOT to flip properties and instead, keep them as rentals. Add me on Snap/Insta: GPStephan

To me, my priority and focus has been to build up my passive income as much as possible, year after year- so far, in the 6 years that I’ve been investing, my income from my rental properties covers pretty much all of my expenses, allowing me to save 100% of what I make from working as a realtor.

This is the type of investing I prefer – partly due to laziness in that I can continue to increase my passive income and grow that up to be able to retire whenever and have total freedom to do what I want, when I want, and partly because it’s less time intensive than flipping properties. I take a very lazy, easy approach to real estate investing. It’s slow and steady wins the race attitude. Once you set up a rental property with the right tenants, it can pretty much run on its own, making you money while you sleep.

Disclosure: People can make a lot of money flipping. This isn’t to say that it’s not very, very lucrative – I know and have represented people that have made hundreds of thousands per deal. It can be a great business to be in and there’s absolutely nothing wrong with it. Everyone’s goals are different and many people prefer the immediate profit of a flip – But here are my own personal reasons why I prefer to keep my properties as rentals.

1. It’s a lot of work to flip a property, especially in a competitive market. Inventory is low and finding a deal worth flipping could take months. While it can generate a lot of profit immediately, it requires your constant work to keep the momentum to continue flipping.

2. When you sell it, you pay taxes as ordinary income – not long term capital gains, which is taxed much less.

3. Market timing. Finding a good deal could take months in Los Angeles…add another 2-3 months of renovation, and another 30-60 days of having the house on the market before closing, and you’re looking at 5-9 months from start to finish per deal.

4. Profit. Given the amount of work and time I’d dedicate to flip a property, it doesn’t make sense for me when it takes my time away from my main focus, which is working as a Realtor.

5. If the property has that much equity in it that you can flip it for a profit, chances are you can charge much higher rents than before, improving your cash flow.

For me, I’ll take passive rents without doing much – it just requires some upfront work and an initial upfront investment, but once you get it going, it can run for a very long time. Having this type of passive income really allows you the freedom to do what you want, when you want – and focus on what really brings you the most joy. For this reason, I prefer rental properties over flipping.

For business inquiries, you can reach me at GrahamStephanBusiness@gmail.com

Add me on Snapchat/Instagram: GPStephan

Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq

Comments

Borg Drone says:

never trust a person that talks with hands… thats 101

Crazy Vines & Pranks says:

haha bullshit you can just rent it while you are looking for a great ofert to sell

Davonn Youngblood says:

Great video though lol why not invest out of state like vegas or Arizona or Washington in a close market

m ph says:

Taxes are what kill you in attempting to flip. Your silent partner (the government) provides nothing, and takes half the profit. Gotta love that spread.

Davonn Youngblood says:

You can flip and 1031 tax exchange so it doesn't matter how high taxes are if you do it right

Zuper says:

Thanks for the always awesome KNAWLEDGE Graham!

Vinccent usa_ says:

lol "now thats fcked up"

-.- pinguin says:

Hmm. What do you think about buying a 450.000€ house with 10% down. And renting to someone. So he will pay my property? I am not doing this because I am 15… but I want to know if is a good strategy😳

-.- pinguin says:

Eyyyyy I was in video 😄

Chucky says:

Good reasoning bruh
I would feel the same way💯💯💯

RealCast says:

hey graham real talk for a second. ive been interested in real estate investing since before i graduated high school ( 20 now ). did one year of community college, but have no interest in going back. I am taking a real estate course next week to get my license, then becoming an agent to get my first multi-family next spring to house hack. real inspiration.

CKal1990 says:

Great video. Keep it up! Be interested in you doing a video between advantages of residential vs commerical. I.e. get a fourplex or 5 units plus?

The Young Salesman says:

I'm just a real estate investor so Flips are my thing cause I have a team that do great jobs. I reinvest 90% of my money so I don't get taxed as much. Also CA taxes are crazy I'm glad I live in Texas.

Trevor Quinland says:

Hey Graham, love your channel ive been watching for a while now. I've seen most of your videos but maybe you made one about this already that i missed, why do you tend to go for single family homes instead of multi unit? I'm trying to get into real estate after I graduate college (i know…) and a lot of the places ive been learning from have a strong preference for multi unit

Jesse James says:

Would you become a developer? Why or why not, I'm interested in hearing your opinion. Thanks Graham, love your videos!

ENTRPRNR says:

Why are you interested in just buying residential properties with just one flow of income per house. Why don't you buy commercial/apartment properties with having multiple flows of income on one property?

Just Pallett says:

Hey Graham, how much return do you see on your investments ? I have been putting alot of thought into buying an investment property. But sometimes I see the returns are very small on minimal or I feel that its not worth the money/time and effort.

ruiz simon says:

One other question do you pay capital gains tax on your rental income? If so do you defer the income to another investment of some sort?

Burke Whaley says:

Have you ever thought of grant cardone's approach where you flip to make cash for leverage in bigger investments? What's your reasoning for not selling and buying a property with 10s of units?

Stella says:

Flip = Flop.
Why would you "sell" the goose that lays the golden eggs?
Rental income keeps you in the market however capital growth makes you wealthy. 
$1300pm can easily be wiped out over the year with vacancies & repairs.

Over time, once you have a few that have doubled in value, sell a few and pay down the debt on a few, which will leave you with true passive income. This reduces risk and ensures that you don't have to work again.

LOE – Living off equity, Is also another stratergy but its bank dependant. 

MAKE SURE!!!!!!  You "use" debt every step of the way – DOOOO NOT use your own money as you can capitalise on interest with debt. There is no interest charged on your own money so there is no benefit during tax time. 
Also have a large DEBT buffer rigged up for a rainy day. 

Also, also, i hope you depreciated the items BEFORE you trashed them? i.e…scrapping depreciation schedule?

Good luck,
Look fwd to your next video.

revorocks123 says:

Thing about flipping though if you don't have enough capital to put down a deposit then surely flipping to build up your pot enough to buy new properties more frequently can be a good strategy? Faster than if you're working a 9-5 on an average salary and trying to save up anyway…

Save Us Elon says:

Hey Graham I’d really like your advice 🙂 I have a few properties here in middle America. Pretty cheap properties but they rent well. Not much $400 a pop. (x16) However I despise living here. Is it worth it to move an keep my properties and keep a middle man or say fuck it and sell it?

Vibrant Deals says:

Love your videos! 2:46 was a nice touch lol!

Johno Bourgeais says:

I agree! Keep it up mate 👍

tim - says:

Graham, you own 5 properties but you never showed us where you live!! 😀

Jason Wester says:

Hey there GrahamStephan! I'm a 19 year old cryptocurrency investor and have seen returns over 100% over the last four months, so I currently have enough capital to afford half of my first home deposit, and I was wondering if you would have any advice for this situation.

I was approached at work by one of my fathers co workers, and we began talking about investment properties and all that, and she is obviously experienced and has made a lot of money before. She was interested in going halves on a home deposit on a property valued around $290,000, however it would be under my name as the required deposit on a home loan would only be 20% on a first home property, whereas hers would be 40%. I believe she is capable of inspiring home renovation, and has a trained builder for a husband who is always happy to help out. Do you think it would be smart to allow her to co-invest on a property under my name, using her experience to make the investment as profitable as possible. Or are there any risks you could point out? Any response would be much appreciated!

can ada says:

Not sure how many cuts/edits you used in this vid, but I do the same thing (rentals) and articulating these ideas as well as you just have is very impressive. Reach out if you get a chance.

Michael Jordan says:

Stop talking with your hands you're not a pissed off black woman

Albert B says:

As a real estate professional for tax purposes of course you don't want to flip because if you buy enough rentals you could be at net income of zero for tax purposes and pay zero tax easy

NOpcBS says:

I agree with ALL your positives for holding and have several perks I could add. Here's my argument AGAINST it AT THIS TIME however. A BIG bust IS coming being #1. #2 being you're young and active, so make the most of it. How would I do that? Well I'm glad you asked. #3 How many YEARS of renting, and all rentings entails, will it take to PROFIT $57,500? Probably at least 5? In 5 years, simply doing 2 flips per year, while averaging $50k profit per flip, you'd net $500,000. Assuming you have out of pocket money in your investment to make it happen, that money could return $50k or $500,000 over the next 5 years. IF you have money out, well that also requires even more time to recover with renting. Flips return it upon each closing. Plus you can ride the waves of pricing. #4 No tenants. Either way works if done well, but rehabs have VASTLY more potential. They simply require far more work, management of work, and time. Countless situations call for even more potential business models, but imo it simply boils down to if you prefer a larger pro-active income or a MUCH smaller passive income. Income properties are an amazing retirement income. Assuming you believe in their future…

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