investing

If you’re attempting to build your investment portfolio with a foundation in real estate the most common question many investors have is: should I flip it or rent it? Before investors attempt to answer that question they should heed the advice of “buy cheap”. Purchasing a property at a significant discount will prove to be easier to profit from regardless of which avenue investors follow.

Flip It

Flipping a house allows an investor to get in and get out without much time invested. Flipping may be a more appealing option to investors if the market prices tend to be higher than average. The profit margin will depend on how much work needs to be done to the house after purchase and how quickly it can be sold after the repairs and updates are made. Investors also need to consider the costs associated with selling a property including realtor commissions, closing fees & taxes, and any buyer assistance than may be negotiated. Flipping properties reduces the investor’s liability considerably since the home will be vacant.

Rent It

Renting a house is more appealing when the property purchase price isn’t as deeply discounted than the average market prices or the average market prices don’t allow for a reasonable profit of at least 10% of the initial purchase price after closing costs. Renting allows for the investor have a steady stream of income and a source of equity to draw on should the need arise. Holding on to a house for several years also for the property appreciate in value and possibly earn a larger profit.

Both options have the potential for making solid profits for an investor. If considering renting a house, investors should evaluate their readiness and ability to be a landlord. Investors should also research the nuances of a specific market and have a well outlined plan for rehab if considering a buy and flip.

You’ll hear the same advice from multiple professionals, if you want an asset that will continually appreciate over time real estate is the way to go. It’s true that real estate is a solid investment. Real estate investing isn’t fool proof though so, how do you know when you’re ready to own a rental property?

Finances

You shouldn’t go into a rental property without a solid financial footing. The same closing costs you encountered during your primary residence closing will be due when you close on an investment property. You’ll also need to be able to make any necessary improvements to make your property attractive to potential tenants as well as meet the monthly mortgage obligations until a tenant moves in.

Many investors use the equity in a property they already own to purchase another property. If you’re able and willing to use the equity in your primary residence you’ll possibly be able to pay cash or pay a sizable down payment to reduce the amount of money you’ll need to finance.

Business

Real estate investing is a multi-faceted business and you should approach it as such. Define your goals for real estate investing. Are you looking to make a quick profit or are you in it for the long term? If you’re in it for the long term you need to develop a budget for upkeep, marketing, general overhead, and unexpected issues. You’ll also need to determine how you’ll meet these costs, how you intend to handle emergencies and disputes with tenants.

Research

Purchasing a property that will costs a lot of money to repair isn’t necessarily worth the discount you many get on the price. The same goes for an immaculate home that will only rent for enough to simply cover the mortgage. You will need to research potential areas for not only home prices but also rental prices. Potential investors should also research the local laws related to rental laws to be fully aware of what is expected not only of the landlord but of the tenant as well.

Logistics

Finally, as an investor, you’ll need to determine how you’ll handle the logistics of being a landlord. You’ll need to collect rent, manage accounts, and maintain the property. If you don’t want or are unable to handle these issues you can hire a management company but be prepared to account for this expenditure in determining your profits.

Successful investing can be measured in many different ways. Defining your goals and assessing if you can reach these goals with the resources available to you will determine your ability to become a successful real estate investor.

Flip it or Rent It?

Ready to Own a Rental Property?

Welcome Home!