We've all seen it on television. People buying old or rundown homes, fixing them up and then reselling them for a huge profit. It looks easy on tv. The person buying the house always seems to have a fairly decent budget and crews to do all the work. Sure, they run into problems, but they usually seem to make a gigantic profit. Some make like a hundred thousand dollar profit for a few weeks' work. But is that real?
Is what we see on television the truth or just what they want us to see? Do they tell the truth about how much money and time it takes to flip a house? And do they really do all the work they claim to do on television? And how do they get financing to buy a three hundred thousand dollar piece of...well, you get my point. Most people can't borrow three hundred thousand dollars to buy a house in excellent shape, let alone one falling down. And many of the buyers seem to still be wet behind the ears. They don't look old enough to buy a car, let alone a house.
But suppose you have managed to get a bank to loan you money to purchase an old house and maybe even a little extra for repairs. And say you actually manage to come in under or on budget and in your time allotment. Will you be better off to sell the house for a fast profit or should you hang on to it and just rent it?
Most people know ahead of time what they want to do with a property. Many people don't want the headaches of being a landlord. No being Mr. Roper for them. They have dollar signs in their eyes, seeing huge profits and no long term commitments. They just want to buy, fix, and resell as fast as they can. They're in it for the fast profit.
But what if you're thinking about retirement and the future? What about holding on to that property and receiving a thousand dollars a month rent? How's that for some extra income after you retire? And what if you owned four or five of them? You'd have a steady monthly income. Oh, sure, you'd have some problems. We all know renters can sometimes be a headache. But it's also a surefire investment. People need a place to live. And many people, for some reason or another, aren't ready to buy a home. They may be single and don't want to buy until they marry. They may be living somewhere temporaily, due to school or a job. Or, quite simply, they just can't get financing.
Whatever the reasons, people will always be looking for places to rent. So rental property is a good source of income. And most of the time, it is a low maintenance, hands free type of income. Some landlords even have a super, (like Mr. Roper) to take care of problems. That way, they truly have nothing to do with the property other than the financial upkeep.
So which is best, fixing up to resell or to keep for future income? That truly is a personal choice. As I said earlier, many people don't want the responsibilities and problems that go with being a landlord. And there are responsibilities associated with being a landlord. Major problems are always going to be your responsibility. But at the same time, you have the comfort of knowing that the rental payment is coming at the first of every month.
So the choice really comes down to whether you want an upfront return on your money or a longterm return. And again, this is a personal choice. Some people can take the profit they make from flipping a house and re-invest it and make even more money. They may continue flipping property. But you are always taking a chance on losing money if you plan on reselling a house. It may not turn out like you hoped. You may end up spending way more than you planned and still get stuck with the house for months while waiting for a buyer.
Whatever you decide is best for you, keep on flipping. Real estate is truly one of the best investments anyone can make. The simple truth is that real estate seldom goes down in value. You might have to spend a little, but most houses can be brought back to their glory days.
Advantages of Real Estate Investment:
Real Estate Can Be Easier to Understand:
When you start investing, it can be difficult to understand everything you need to know to make a profit. Many types of investments rely on abstract concepts and complex algorithms, which are especially difficult to understand.
Real estate, on the other hand, involves the purchase of physical property and most people are familiar with real estate to some degree. Investing in real estate can be much easier to understand than complex investments developed by mathematicians.
Real Estate Is Improvable:
After you buy a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the stock depends on company management and their corporate success, which is out of your control.
In contrast, real estate investments are directly under your control. Though you can’t control demographic and economic changes, or acts of God, you can control many things relating to the physical property and tenants. With good management of your overall real estate portfolio, you can tangibly improve the value of your investment and build wealth.
Real Estate is a Hedge Against Inflation:
Real estate is one of the few assets that reacts proportionately to inflation. As inflation goes up, housing values and rents go up.
Though real estate in general is a good hedge against inflation, rental properties that are re-leased every year are especially effective, since monthly rents can be adjusted upward in inflationary periods.
For this reason alone, therefore, real estate is one of the best ways to hedge an investment portfolio against inflation.
Real Estate Properties Exist in an Inefficient Market:
Unlike the stock market, the real estate market is full of inefficiencies. There is a lack of transparency relating to individual property values and also the strength of different markets, which means that real estate investments have the potential for very high profits.
Real estate investors who do their research, especially with help from industry experts, can find great real estate bargains.
Real Estate Can Be Financed and Leveraged:
Of course, you can technically purchase stocks and other assets using debt, but this can be very risky because the financing is not to purchase a hard asset. Real estate, on the other hand, is a market where products are usually bought with debt.
Real estate investments purchased with hard money or a mortgage can be structured in ways that are rather safe and affordable, so that large purchases can be made with a relatively small initial investment. The result is the purchase of a hard asset that appreciates year-over-year, and paying for it primarily with other people’s money.