2 Year Real Estate Investing Strategy

To build a success real estate investing business you've got to think beyond a single property.  In this video, Gary Bailey outlines a 2 year investing strategy that can be used whether you want to buy and flip or buy and hold.


Start flipping houses today!

The strategy outlined below works for both houses that you intend to flip or houses that you want to hold as rentals. Our 2-year real estate investing strategy can be summed up as this:

Buy-Fix-Sell

complete 3 properties in 2 years

Buy-Fix-Sell

complete 3 properties in 2 years

If you are flipping, consider thinking about a 3 house strategy over a 2 year period. This is just the 1st house of your 3 house strategy. You want to get through the first project, make as much money as you can, and then get onto your next house. If you are looking to build a rental portfolio, your goal should be to purchase 5 houses in 2 years. The timeline is compressed for rental properties because the renovation period take about half of the amount of time as a flip property.

Before looking at how you would complete that many projects in 2 years, let’s look at the different steps of a single flip house project. Each project has the following stages:

  • Pending Purchase of the Property
  • Property Renovation
  • Marketing Period
  • Pending Resale to Retail Buyer
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Month 1: Identify Your First Property

If this is your first project, be sure to select a property that needs no more than $40,000 in work. $40,000 may sound like a lot, but for most Midwest markets this is a pretty average rehab. There is no need to go swinging for the fences for your first project.

  • Avoid any houses that have major structural issues or foundation issues that can’t be easily repaired and warrantied by a foundation repair company.
  • Don’t go out and buy a house that needs $100,000 in work because it will most likely not work out the way you intend.
  • Find a property that is in a “bread and butter” area where other investors have had success
  • Once you get a property under contract, spend this time planning out your scope of work and your budget.

End of Month 1

  • Close on Your Purchase
  • Start the Renovations
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Month 2: Start the Renovations

The renovation period of your project is, hands down, the most important part.  How well you manage your renovation can mean the difference between long term success and absolute failure.  During the rehab, you are going to treat this like it is the most important thing going on in your life.  How you do on this first house is going to establish how well you do the next 15 years of your real estate investing career.

Expect to spend 10-20 hours a week managing your project.  You’ll need to watch the project like a hawk.  Plan to stop by the job site every day on your way to and from work.  On the weekends you may be out there doing some of the work yourself, meeting contractors, lining up bids, getting materials delivered.

You are going to hit it with overkill.  A rehab isn’t something that you can just buy and let it go.  You won’t show up one day and find that magically there is a new roof on the house - unless you called a roofer and made sure they showed up to complete the work.  The house won’t rehab itself.


How long will the renovation take?

We measure the speed of a renovation by how much work is being completed each week.

We call this figure the “Renovation Rate” and it is calculated by dividing the number of weeks by the total budget.

Your Rate of Renovation will determine how quickly the renovation is completed.  Most investors drastically underestimate how long the work will take and how much it will cost.  For most seasoned real estate investors, the goal is to complete $10,000 worth of work per week.  This means that they should be able to complete an average $40,000 renovation in about a month.

Your Rate of Renovation will determine how quickly the renovation is completed.  Most investors drastically underestimate how long the work will take and how much it will cost.  For most seasoned real estate investors, the goal is to complete $10,000 worth of work per week.  This means that they should be able to complete an average $40,000 renovation in about a month.

Renovation Rate for real estate investors by experience level

BEGINNING INVESTORS

$2,500 per week

4 months to complete a $40k renovation

EXPERIENCED INVESTORS

$5,000 per week

2 months to complete a $40k renovation

SEASONED INVESTORS

$10,000 per week

1 month to complete a $40k renovation

Month 6: List the House to Sell in 30 Days

Once the renovation is 100% complete, list the property at a price where it will sell in 30 days or less.  Work with your real estate agent to come up with a pricing strategy based on recent market data in the area.  Remember, if you went over your budget, the house isn’t magically worth more so don’t expect to be able to sell it for more than what comparable sales are bringing.

Once you list the house, pay close attention to the feedback and showing activity.  A good rule of thumb is that if you aren’t getting showings on your house then the price is too high, and if you are getting a lot of showings but no offers that may mean that the quality of the rehab isn’t as good as you thought it was.  While these stats may vary by the area and market conditions, many investors abide by a rule of thumb that 20 showings should be enough to sell a house.

The reason you want to get this first house to sell quickly is that you need to get onto your next house.  Don’t get stuck thinking that you’re going to make a ton of money on your first house.  You’ve got to be thinking long term.

GOALS FOR YOUR 1ST HOUSE

  • Get across the finish line
  • Sell or rent within 30 days
  • Shoot for a small profit
  • Learn for your next house
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Month 7: Get your Property Under Contract with a Retail Buyer

Once you list your house, start the process of looking for your next project.  Take what you learned from your first project and use that experience to identify a property that may need a little more work but that has a larger profit margin.

Don’t get stuck in the trap that many investors find themselves in where they are chasing down the “perfect deal” that has a huge profit margin but needs very little work.  Those deals are like unicorns: they don’t exist.

Month 8: Sign a Contract to Purchase your Next House

You will have plenty to keep you busy once your first property goes under contract with a retail buyer.  There will be inspections and repairs and negotiations – but don’t let those activities distract you from your goal of getting your next property under contract.

Use this time wisely.  Take what you learned from your first project and get a jump start on your next house.  Spend time planning out the scope of work, setting your budget and meeting with your contractors so that you are ready to kick your project off as quickly as possible.

Month 9: Double the Closings = Double the Fund

Month 9 will be busy.  After you successfully close on the sale of your first property, you will then close on your purchase of your next property.

Don’t let the fact that you’ve got 2 closings in one month go to your head – you’ve still got a long way to go.  But pat yourself on the back and enjoy a cold drink to celebrate the fact that you have now gone from a New Investor to an Experienced Investor.  Now get back to work because you aren’t done yet.

Using the monthly schedule outlined above, our 2 Year Real Estate Investment Strategy can be executed for both buy-fix-sell and buy-fix-hold properties.
2 year house flipping strategy
2 year rental portfolio strategy