Should I Flip Properties In High End Markets Or Low?

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“Is it wiser to flip out of state purchases, or do you have a reliable system that allows you to buy and hold even if the properties are not always in the best areas?” – William Hayes, South Pasadena, California

Joe: Since he’s from California, I’m guessing that he’s thinking that it doesn’t make sense to flip in expensive areas? Is that the question? If that’s the question, there’s going to be certain things that you can’t do in California, for example, you probably won’t take a $600,000 “Subject To” property that has a $3,000 a month payment but only has $2,500 a month of income because you’ll have a $500 a month negative.
 
Joe: It might make sense when you buy it if you have dramatic income from or dramatic equity in that property, but most of the time on high income or high value properties’ like that, Subject To doesn’t make much sense. Usually, when you get over $200,000 on Subject To’s, it’s not as wise, but you can still do the “For Rent Method” on these types of deals and if you buy them dramatically under market value, you can do wholesale deals on those as well.
 
Joe: It might make sense for you to focus on areas that allow you to do both. If you live in California, then it makes sense to do higher end properties because you’re going to be there and you’re going to be face to face with those people and it’s easier to do a deal locally than it is to do it remotely at least at the beginning.
 
Joe: Eventually, you’re going to learn how to do it all remotely even though it’s local. You’re not ever going to go out and see these properties. You’re not going to ever go out and meet these buyers and sellers. You’re not going to do any of that work. It’s all going to be from your own office and home, so it’ll make it a little bit easier to do that.
 
Joe: Now, if you’re looking for properties you want to keep and build into your portfolio, then you want to look into areas that have properties that average maybe $100,000 to $200,000. Those are good solid Subject To areas where they have good neighborhoods, good school systems and the rent will usually cover the mortgage payment even if the property is mortgaged up to its full value and you can still have maybe $100-$300 a month positive cash flow, which is what you want on a Subject To that you’re going to keep long term.
 
Joe: Then you sell that property, you collect a lease option fee, collect $200-$300 a month of income from that property and you have some equity in that property. If the lease option buyer buys it, or if they don’t exercise it, you get the tax benefits on it, you get the appreciation on the property and you get the buy down on the loan every month. I mean, it’s a wonderful thing, and that’s how you build wealth over time.
 
Joe: So, it doesn’t matter where you do it. What matters is what your exit strategy is, what type of deal you’re doing, how you’re going to put it together – all of those things matter, not where you’re doing it. Now, where you’re doing it may help determine what your exit strategy is going to be. So keep that in mind as you go through the process.
 
Joe: Learn the zero down structure hierarchy. I teach it in my book, “Automated Real Estate Investing”. I teach it in the “Push Button Method” and I teach it in my mentor program. Alright, I hope that helps.