Filling your
Flipped
Property
Navigating rental landscapes for
your rehabbed properties.
FLIPPING HOUSES 101 eBOOK SERIES
4
PART
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2Kiavi Flipping Houses 101 eBook Series
Contents
03
Introduction
Let’s introduce you to the 6 F’s of house flipping
04
Part 4: Fill
You’re ready to sell, but have you thought about renting?
05
A Look at the Rental Market
Let’s look at the rental market and trends across the nation
07
Hot Rental Market Contributors
Handy infographic that highlights key stats of what affects
the rental market
09
Should You Sell or Rent?
Gain a better understanding on whether a buy-and-hold
strategy is right for you
11
Introduction to BRRRR
This investment strategy involves flipping distressed
property, renting it out and then cash-out refinancing it in
order to fund further rental property investment
14
Let’s Do the Math
See if renting a property could be more profitable than
selling it right away by looking at a real-world example
20
About Kiavi
21
Bibliography
19
Conclusion
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Introduction
House flipping, or fix and flip investing, typically refers to buyers who purchase distressed properties, fix them up, and then
resell them for a profit. If you’re just starting in fix and flip, you probably realize there’s much to learn, and the process may
seem overwhelming. If you’re a seasoned investor, you know that in this business, you can never stop learning tips, tricks
and strategies that can lend to maximized success.
Fix and Flip
Since the height of the housing crisis in 2009, the house-flipping market has experienced steady growth. In 2022, 114,706
single-family properties in the US were flipped in the first quarter alone–representing 9.6% of all home sales, or 1 in 10
transactions
1
.
House flipping has also been popularized – and somewhat sensationalized – by reality television shows such as
Flip or Flop,
Flip This House, Property Brothers
, and others, attracting tens of thousands of new investors to the space. But, unlike what
you might see on TV, buying and flipping properties isn’t as easy or straightforward as it appears.
About this eBook
Flipping Houses 101 is a series of eBooks that cover the “6 Fs”—Find, Finance, Fix, Fill, Flip, and Fun—of flipping houses. In
this eBook, we examine part four—fill—and take a deep dive into tips and tricks for implementing a buy-and-hold (rental)
strategy.
1
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4Kiavi Flipping Houses 101 eBook Series
Find Finance Fix Fun
Fill
Flip
“Filling” means renting out your house and filling it with tenants after you finish the rehabilitation instead of selling it
immediately. This is known as a buy-and-hold strategy. This is optional—you could also sell the property unoccupied and
exit the investment.
But there are several reasons, both property-specific and market-driven, to fill a house with tenants and rent the property
before selling it. Let’s dive in and discover how to rent a property to explore a different avenue of investing in real estate.
We’ll cover:
• A look at the rental market
• Hot rental market contributors
• Should you sell or rent out a property?
• Introduction to BRRRR
• Let’s do the math
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A Look at the Rental Market
Investing in rental properties has long been considered a sound investment—that sentiment continues to grow as tenant
demand, occupancy levels, rental income growth, and property values soar. The white-hot rental market nationwide is
spurring both seasoned real estate investors and beginners to dive in headfirst.
Pandemic migration trends, influenced by remote work, changing lifestyles, and record-low interest rates, sparked a surge
the inventory of homes actively for sale in July 2023 stood at 646,698, which is 37.4% lower than the inventory at the end
of 2019, which was 1,033,452.
1
Buyers continue to significantly outnumber sellers in many markets, maintaining elevated
home prices.
of approximately 29%.
2
Such a swift and significant increase over a three-year span has substantial implications for
potential homeowners, particularly those looking to purchase their first home. As more individuals find themselves priced
out of the home-buying market, there’s a shift towards renting.
The average national rent
19.75% increase over the
same period in 2021
3
1
2
3
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6Kiavi Flipping Houses 101 eBook Series
Additionally, rents all across the board have risen, but rental prices for single-family homes have really shot up in the past
year. In recent years, residential real estate investors with a single-family rental property saw their:
Asset
Appreciation
Skyrocket
Increasing to
No Trouble
Occupied
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Hot Rental Market Contributors
Millennial Trends
Survey data from Apartment List shows that in 2022, 24.7% of millennials said they plan to “always rent” rather than buy a
1
.
1,2
1
Millennials
age 40 in 2021
60%
Gen Xers
when age 40
64%
Baby Boomers
when age 40
68%
Silents
when age 40
73%
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SFR rents increased by 27.9% from January 2020 to mid-year 2023. Occupancy rates have remained above
95% since January 2018
2
.
Occupancy
1
2
3
Home sales decreased by 18.9% annually in June 2023, with the median existing home price reaching
$410,200, a decline of just 0.9% compared to the all-time high from the previous year of $413,800
3
.
Potential Homebuyers Priced Out of the Market
1
.
Migration Trends
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Should You Sell or Rent?
Is a Rental Strategy Right for Your Property
Financially, several points can be made to favor renting out your house versus selling right after rehabilitation. When making
this decision and learning how to become a landlord, it’s crucial to cover all these bases. Let’s go through them.
Tax benefits
Several tax breaks can save you money as a rental real estate investor. For example, reasonable costs of owning, operating
and managing the property are often deductible, saving you quite a bit when tax time rolls around.
Contact your tax advisor before getting started to learn more about the potential tax benefits of owning rentals.
Positive cash flow
In rental investing, positive cash flow is the goal, which is when money is added to your bank account monthly from your
occupied rental properties. Once you add more rental properties to your portfolio, you can earn positive cash flow without
your positive cash flow.
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Appreciation and Equity
When investing in properties for rental purposes, you opt to hold on to the property for the long term. In comes
appreciation—the value of real estate properties tends to increase over time.
With a good investment, you can turn a profit when you decide that it’s time to sell. Every month you collect rent, the funds
you receive contribute to paying down the loan’s principal, thus building up your equity. Simply put, as you pay down the
property’s mortgage, you’re also building an asset that makes up a part of your net worth—equity.
As it builds over time, equity can give you the leverage you need to buy more rental properties and increase your cash flow
even more.
Passive income
When flipping a home, you’ll likely go many months with no income, followed by a hefty payout upon sale. This sort of
irregular cash flow can be difficult for you and your family to plan around, given the much more consistent nature of your
own living expenses, bills, education costs, etc. If you rent out a property instead of selling, monthly rent from tenants
provides a passive income you can rely on as long as the property is occupied.
Cash-out refinance
When you hold a property long enough and refinance it, lenders will use the home’s value rather than the property’s cost
basis. When this happens, you can get most of your money out and generate an excellent return on equity, assuming your
home is appreciated after you rehabilitated it.
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Introduction to BRRRR
The residential real estate community is buzzing about the BRRRR strategy, which has piqued the interest of both novice
and professional real estate investors alike. After all, who wouldn’t be interested in the potential for a low cash out-of-
pocket and high return opportunity?
So what is BRRRR exactly?
The BRRRR method, which stands for Buy, Rehab, Rent, Refinance, Repeat, is a commonly used real estate investment
strategy.
Buy
Rehab
Rent
Repeat
Refinance
BRRRR
The
Strategy
Unlike the traditional method
Buying a distressed property
Rehabbing the property
Renting it out
Doing a cash-out refinance
Using that cash to the process
1
2
3
4
5
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Why BRRRR?
When done successfully, the BRRRR strategy can enable real estate investors to earn passive income while increasing their
rental portfolio to experience long-term asset appreciation. Here are some reasons why this strategy is so powerful for
growing a strong portfolio:
Earn a passive income while holding rental properties that will
continue to appreciate in value over time.
Investing for Financial Freedom
Building a rental portfolio can come with tax benefits. Consult a
CPA for more information*.
Potential Tax Benefits
Under the BRRRR model, the end product is a beautiful, newly-
renovated home that is attractive to renters. This can both
decrease vacancies and allow the investor to charge top dollar.
Earn High-End Rents
BRRRR has the potential to allow investors to build huge amounts of
equity without investing huge amounts of cash.
Incredible Wealth-Building Potential
regarding your specific legal or tax situation.
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Download eBook
Looking for More?
For more information about the BRRRR strategy, check out
by-step breakdown of the BRRRR method, insights into how
it works, and a detailed example of how quickly it can help
investors scale attractive returns using this strategy.
One of the main benefits of BRRRR is earning cash-on-cash returns that are much higher than when using
the traditional method of buying a turn-key rental. This is why the final “R” is added to BRRRR…successful
investors continue to repeat the process. Below is a hypothetical example comparing the potential cash-on-
cash return with the BRRRR method vs. turnkey.
Higher Cash-on-Cash Return
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After rehabilitating a property, holding and renting out your house can be substantially more profitable than selling it right
away, provided you are willing to invest the time and the capital if market conditions tilt in your favor. To demonstrate, let’s
walk through the numbers of a hypothetical flip.
Scenario 1: Flip Immediately
In this scenario, we will buy a hypothetical $147,600 home in cash, rehabilitating and selling it at its new value.
In this case, you invested $147k of your money and increased the home’s value by about $23k. After the project cost and
taxes, you netted about $15k in profit or 11%.
Cost Basis
Cost to Flip
Ordinary Income Tax
Buy the Home, Rehabilitate, and Sell
$23,400
Net After Tax
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Scenario 2: Hold for 5 years
In this scenario, you still rehabilitate the home and
increase its value by $23k. However, you do not sell it.
Instead, you first:
As mentioned above, a cashout
refinance will allow you to take advantage of the new cost
of your property and pull cash out of your home’s equity.
Let’s say you finance 65% of the property. This results in
having a $63k equity position, despite having pulled out all
but $31k.
Time to fill the property. In this case,
we’ll assume you can start renting out your house for
$1,800 a month, or 1% of the property value per month.
Home Value
Loan to Value
Mortgage
Equity
Buy the Home and Rehabilitate it
$180,000
$117,000
$63,400
Cash Invested
Gross Monthly Rent
Mortgage Payment
Insurance
Property Tax
Turnover Cost
Maintenance
Monthly Breakdown
$1,800
Net Monthly Rent
Net Return
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Rent for 5 Years
Here’s what the math looks like, assuming you have
tenants for 5 years.
Let’s sum the proceeds from renting with the proceeds
from selling to determine net profit and profit margin:
Sell After 5 Years
After 5 years of renting, it’s time to exit. We’ll assume 3%
home appreciation per year.
In scenario 2, holding, renting out a house for 5 years,
then selling nets you $55k versus your initial investment
of $147k, for margins of 37%. This is $40k more than
what you make by flipping immediately.
That said, it did take 5 years. In scenario 1, you can make
15k, or 11%, in one year. Scenario 2 nets you 37% over 5
years or 7.4% per year.
Ordinary Income Tax
5 Year Breakdown
$28,500
Net Rent After Tax
Home Price Appreciation
Price at Sale
Cost to Sell
Gain on Sale
Long Term Capital Gains
Proceeds From Sale of Property
3%
$202,592
$10,130
$44,862
Net at Sale
Net at Sale
Net Rent After Tax
Add it All Up for Total Profits
$147,600
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Adding in a Property Manager
If you don’t live close enough to the property to quickly
and regularly check in, resolve issues, and meet with
tenants, it’s much better to hire someone who can.
Property management companies are businesses that
handle tenant placement, maintenance, and day-to-day
management and upkeep of your property in exchange
for fees.
Property management companies come in all sizes,
but for the highest level of service, we recommend a
due diligence—collect references and inquire about
average days to placement and turnover cost.
Responsiveness is critical, so try to get a sense of this.
email? Remember, these are people you trust to take
care of your property. If a pipe or appliance springs
a leak, a day or two is the difference between a minor
repair and potentially thousands of dollars of damage.
Once you’ve found the right management company, be
prepared to pay. You’ll be asked to pay several fees, the
three most common being a tenant placement fee, a
management fee, and a maintenance surcharge.
Using the same house in our previous scenarios above,
here’s how these affect the economics of your property
investment.
Gross Monthly Rent
Mortgage Payment
Insurance
Property Tax
Turnover Cost
Maintenance
Tenant Placement Fee
Property Management Fee
Maintenance Surcharge
Monthly Breakdown (managed by 3
rd
party)
$1,800
$475
Difference
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Comparison Over 5 Years (Self-Managed vs. Third-Party)
Managing the property yourself would net around $55k, and hiring a manager would net about $47k. That represents a
difference of about $8.5k, or a 15% decrease in profit margin. Here’s a fundamental question to consider: Is this money
worth the peace of mind and the service you’ll get from a good property manager?
Ordinary Income Tax
Home Price Appreciation
Price at Sale
Cost to Sell
Gain on Sale
Long Term Capital Gains
5 Year Breakdown (rent 5 years, then self) 3
rd
Party
$28,500
$19,095
3%
$202,592
$44,862
$35,890
$15,690
$10,693
3%
$202,592
$44,862
$35,890
Total Income, 5 Years
$73,362
$60,822
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Conclusion
properties,” the fourth installment of our Flipping Houses 101 eBook series. Throughout this journey, we’ve explored the
exciting world of house flipping and the strategies that can amplify your success.
In this eBook, we delved into the concept of filling your flipped property through the lens of rental strategies. We
emphasized the importance of considering alternatives beyond selling and how renting out your property can provide a
steady income stream while maximizing your long-term returns. By exploring the pros and cons of selling versus renting,
you better understand the buy-and-hold strategy and its potential benefits.
Furthermore, we introduced you to the BRRRR strategy—an innovative
approach that involves flipping distressed properties, transforming them
into rental assets, and leveraging cash-out refinancing to fund future
investments. This powerful strategy allows you to build a robust real estate
portfolio while optimizing your financial resources.
As you continue your real estate investment journey, we encourage
you to explore the remaining eBooks in the Flipping Houses 101 series.
Each installment offers unique insights and valuable knowledge to help
you master the art of successful house flipping. Our upcoming eBook,
“Mastering the Art of Selling Your Rehabbed Property Successfully,” will
equip you with practical techniques to ensure a seamless and profitable sale
of your flipped properties.
Thank you for embarking on this educational journey with Kiavi. We are
honored to be your trusted partner in your real estate investment endeavors.
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Since 2013, we’ve believed that real estate investors could benefit from the power of modern technology and tailored
industry expertise. In just a few years, we’ve built an industry-leading team and a powerful technology platform that
delivers flexibility, speed, and simplicity that our customers rely on.
Together, we’ve funded more than in loans, unlocked of value for real estate investors to help
them scale their business, and completed over .
As we look to our future, we’re committed to helping real estate investors revitalize the approximately $25 trillion worth of
aged U.S. housing stock to provide move-in ready homes and rental housing for millions of Americans across the country.
Ready to Get Started?
Kiavi’s advanced tech platform removes many traditional barriers, automates time-consuming manual steps, and provides
quick approvals and true transparency throughout the entire process. We provide robust backing with expert guidance for
both new investors as well as seasoned professionals.
Fix and Flip / Bridge Loans
Short-term financing for purchasing
and rehabbing investment properties
with high leverage, competitive terms,
and fast closings.
DSCR Rental Loans
Flexible term lengths, low rates, and
easy processes to maximize monthly
rental income allow you to enjoy the
benefits of property appreciation.
Rental Portfolio Loans
low monthly payment and customizable
loan to make managing your growing
portfolio easy.
Learn More Learn More Learn More
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ATTOM Staff, “Home Flipping Remains Up In 2022 Across U.S. But Gross Profits Fall To Another Low”
ATTOM, March 23, 2023, https://www.attomdata.com/news/market-trends/flipping/attom-year-end-
2022-u-s-home-flipping-report.
stlouisfed.org/series/ACTLISCOUUS
stlouisfed.org/series/MSPUS
Rob Warnock, “Apartment List’s 2023 Millennial Homeownership Report”, April 18, 2023, https://www.
apartmentlist.com/research/millennial-homeownership-2023
Sunnier, Rural Environments.” June 22, 2022. https://newsroom.transunion.com/renter-migration-
patterns-drive-42-increase-in-out-of-state-applicants-as-renters-seek-sunnier-rural-environments/
US Census, “Quarterly Residential Vacancies and Homeownership, Second Quarter 2023,” August 2, 2023,
https://www.census.gov/housing/hvs/current/index.html
com/2023/07/20/homes/existing-home-sales-june/index.html
Bibliography
external content sources.
Revised 083023 EI
