Fix and Flip or Rent

What is the Optimal Investment Strategy in Today’s Market?

Are you curious about the best investment opportunities in the current market landscape and the potential profitability of these investments? Real estate investors often face a choice between two primary strategies: fix and flip or buy, fix, and rent. As the president of NWRPM (www.NWRPM.com), I have the privilege of guiding investors in both strategies across regions from Portland to Eugene and Central Oregon. My overarching advice is to maintain a balanced investment portfolio; however, strategic timing can significantly enhance profit margins and mitigate unnecessary losses.

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The fix and flip market has yielded substantial profits for astute investors in recent years. Our clients have typically realized returns on investment (ROIs) ranging from 20% to 50%, although these margins are becoming increasingly tight. Fortunately, Oregon's status as a redemption rights state has deterred many large national investment firms, resulting in ample opportunities for local investors with less competition. While other markets across the nation are contracting, Oregon remains a desirable location, although this dynamic may shift. Additionally, the low inventory in the retail sales market has sustained high retail prices, supporting fix and flip ventures.

Currently, there are still opportunities for fix and flip investors, but these deals are becoming scarce unless you are prepared to adjust your profit expectations. In my professional opinion, this trend is likely to persist for no more than one to two years—two years may even be optimistic. Consequently, we recommend that our investors begin exploring properties for long-term rental potential.

As many successful long-term investors will affirm, adaptability in your investment strategy is crucial to align with market demands. Ideally, you should pivot before the market shifts to maintain a competitive edge. I advise all investors to gradually expand their rental property portfolios over time, as this approach can generate a robust passive income stream. If your primary focus remains on the fix and flip market, there are ways to integrate rental properties into your overall strategy.

Everyone is aware of the current rental market and the significant rent increases over the past few years. While rental prices are expected to plateau in the coming year, a decrease is unlikely. If you’ve ever considered building a rental portfolio, now is the opportune moment. With lending rates still low and rents at record highs, many properties are yielding better cash flow than in typical markets. Within our property management company, we have clients purchasing single-family homes and achieving net profits of $300 to $500 per month, even after accounting for management fees. This level of profitability is exceptional; typically, breaking even is considered a success, with profits realized through tax write-offs and property appreciation.

If you prefer not to manage a rental portfolio long-term and wish to focus on fix and flip deals, consider holding some of your single-family home acquisitions as rentals. By purchasing and renovating these properties with cash, you can refinance them into traditional financing to recoup your investment. Subsequently, you can rent them out for monthly income as a holding strategy. I recommend this approach specifically for single-family home rentals due to their liquidity; they can be sold easily in the future when the fix and flip market rebounds. This strategy allows you to target a broader buyer pool, not just investors.

By adopting this strategy now, you can outbid fix and flip competitors in the wholesale market, increasing your chances of winning at auctions. You will benefit from monthly rental income and future profits from property sales due to market appreciation.

The key takeaway for investors is to maintain a flexible strategy. Avoid becoming entrenched in a single investment approach. Continuously educate yourself about the market and be prepared to adjust your strategy in response to current and anticipated market shifts. There are profitable opportunities in every market condition; the challenge lies in identifying and seizing the right moment.

Christian Bryant

President – IRC Enterprises

President – Portland Area Rental Owners Association