Flip and Danny break down three real estate paths: flipping (active, high risk), turnkey rentals (semi-passive, you manage some decisions), and syndications (pooled investments with ~$50,000 minimums and typical 3-7 year holds). Each has different risk levels, timelines, and how much work you actually do.
Questions this video answers
January 19, 2022
Episode 19 (Ep 19)
$50,000 (referenced as an example for the Daytona Beach deal)
Hey, everybody, Flip and Danny here, founders of the Freedom Real Estate Group family of companies. Yo. Welcome to another episode of our podcast.
Which is called Freedom through Pasa Linko.
That's right. And today's episode is Flipping versus turnkey versus Sinkhole.
That's right.
So we wanted to talk about those three sort of against each other, the.
Pros and cons, because we did a podcast. Right. And it was popular.
It was very popular. It was very long.
Yes. This one's got to be we.
Huge whiteboard.
Yes. Yes.
This one's we with no whiteboard.
No whiteboard. No.
So we're gonna talk about all three. So number one is flipping. So what is it? And it's funny because my name is Flip Flipping. I can't tell you how many times I've heard that joke. But anyway, what is it? We. We're going to find it, we're going to rehab it, we're going to sell it, and then we're going to repeat. So there is no. There's no flow.
And it's not passive at all.
No, no. That would be called active.
Yes.
And you're taking all the risks, you know, and so say you buy the property and get into the property and you do the rehab. Then all of a sudden you find out that there's something wrong with it. And you have to. Now you have to get city inspections and you got to get. You know, next thing you know, 10 months later, you're still sitting on the same property and you can't do anything because the city's holding you back. And so there's so many risks.
Yes.
I mean, there's risk in all of those things.
Yes, 100%.
But there's. We've seen that with some. With some of our properties. And all of a sudden, next thing you know, it's like 16 months later, we're finally putting it on the market.
Luckily, we're doing volume, so.
Yeah, exactly. They're not all like that, but we have seen a few of those.
Yes.
Now then, turnkey real estate.
Yeah.
So turnkey again. It's work as a company. We do all the work. And then. So then we sell it to you. So you're the sole owner.
Yes.
You have 100 control. You're getting all the cash flow.
Yes.
And you're getting all the tax benefits.
Yes.
And so it is semi active because you didn't do anything. You just. You just bought a performing asset.
Yes.
There's the bad.
Yeah, it's not even the bad. It's just the active side so many people think it's passive and it's like you're involved.
So you determine what level it is that the property management calls you. So you're still dealing with some tenants and toilets. Because if it's a problem that's over your threshold, they're calling it.
Yep.
You know, there's also. What if it's vacant?
Yep.
You know.
Yeah.
You're going to have to deal with a property management company to get somebody in there. And when it's vacant, guess how much money you're making.
Zip.
If you have.
Yeah. Especially in single family residence. Yep. And that's. They've got to go do a scope of work. They've got to send it to you. You got to review it, you got to approve it. It's. Yeah, there's stuff involved.
And then, and then unless you're buying in all cash, you still have to go through all approvals to get the property. So there are some, there is some pros and cons to that as well.
Yeah. So flipping was active. Turnkey is what we call semi active. For people who want rental properties, turnkey is the way to go because it's as passive as you're going to get. But don't be, don't be fooled that it's just a completely 100% passive investment. It's just not. You are going to get phone calls and you're going to be involved in some decisions. So that's okay. We love real estate properties. I don't mind answering the phone for that $650 water heater that's got to go get replaced. I'm okay because I love the cash flow so much. It doesn't matter to me. But we're going to compare it lastly to syndications. So syndications, you're going to pool funds. So you've got a limited liability. Right. So we talked about this and I don't know where the episodes are going right now. So I don't know if you heard this yet or not. So I'm going to say it anyway. But if you haven't get ready $50,000. If it's a big large like the Daytona beach property that we keep referring to because it's so recently closed. If you invested $50,000 in that, that was like we were raising 11 or $12 million. So your liability is limited to the amount that you invested. So that's a really cool thing. It's hassle free because you get to look at the documents and the property and all the information, ask your questions up Front and then you're in. And you're usually in for three, five, seven years. It just depends on the deal. So that's fantastic. You also get preferred cash flow. I don't even. I need to make this an episode because we need to talk about preferred cash flow. But for the sake of this episode, preferred cash flow means you get paid first. So if we're the general partners of a deal, you're getting paid before we're getting paid. And that is an important thing to be thinking about when you're investing in a deal. Are our interests aligned now? We're doing all the work. Are we making sure that our investors are actually getting their money back plus the interest that we promised them? You're getting higher returns. Sometimes those higher returns are because of the tax benefits that are involved or because of the fact that you might be able to get some of your money back and stay in the deal for a little bit longer. So there's different pieces to that. And again, it depends on the deal. So we're working on a deal right now. I can't talk about it because it's a 506B, which B stands for buddy. You have to be a buddy. And you probably didn't hear about it because we actually have these investors that have funds ready and so we're sliding them into this deal and it probably won't even go public to our buddies. So you've got to develop that relationship with us so that we can slide you in. But it's a deal where you've got this opportunity to have some quarterly cash flow, some accrued cash flow. You're going to get your investment back and then you're still going to get a little bit of money here, you know, throughout I think one to one to three years. Can't remember but so that's really, really cool. There's varied timelines. So if you want it to be like three versus seven, then you can talk to us about which ones have the timeline that you really want to have. It's less work. You've got the tax benefits. We are talking about no loan approvals because you didn't have to get approved. We are getting approved for the assets itself. You're just investing in the property, building that equity piece for us to be able to buy it, do the down payment, do all the Capex repairs and everything that's going to allow it to that forced appreciation so that we can sell it at the perform a level that we anticipated to. I used a lot of words that I probably haven't described yet, but you'll learn more about them. Just keep watching. So it's passive, 100% passive. It's why it's one of my favorites because it's just I less control, minimum investment. You do sometimes have to be accredited. So that might be the cons, but not always. Just be our buddy and you will be able to see the ones you don't have to be accredited. Boom, boom, boom.
Well, we hope that you enjoyed that episode. I know that was a lot at you right away, but seems like they all are. So again, make sure you join our Facebook group. Right up top here facebook.com groups freedom through passive Income.
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Bye.
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