What is more profitable in your opinion in this market for RE investing.
Buy and Hold, or rehab and flip?
thanks
If you look at a list of truly wealthy real estate investors, more of them “own” property than just “flip” property.
If you start buying properties in your late 20s and hold them for 30 years, you can retire comfortably in your 50s with a debt-free portfolio worth many times what you paid for it, and you won’t have lined Uncle Sam’s pockets along the way with capital gains.
Having said that, there are times and properties when flipping makes more sense. I recently sold a duplex that I thought about holding on to, but then I decided that I’d rather take the $35,000 profit now as opposed to eeking out a $150/month pre-tax profit in the short run. I also needed the money to do other things.
There’s no real right or wrong answer to your question. It’s all about what makes you comfortable and able to sleep at night.
Thank you for your response. your right about the buy and hold, and the long term appreciation, actually it’s been an upward swing since WW2 in Real Estate, yet you can also use cost of liveing, inflation etc. and it might not be much of a “bull run” when figured out and the costs to hold, that’s another tangent i could run off on.
Real estate might not be what it once was, and with the building of new homes, condo’s etc. some of the older properties might get harder to sell as time goes on due to functional obselescance, especially pre-1920 properties or any older property w/ one bath, or other features people aren’t willing to pay top dollar for that they could spend the same amount on a newer property which could be more liveable for them.
Taxes, taxes, taxes you pay and never get back, quite an expense and can work negatively in the long-term hold, if appreciation isn’t what it once was.
The saying that people are throwing their money away renting, isn’t really true to all circumstances, especially if it’s in an area w/ high property taxes, and costly upkeeps to the rental property.
In my market if someone was going to live here for just a few years, they would be way better of renting than buying.
The market is a strange place, and waits for no one.
Most landlords I speak with are haveing a hard time getting their rent on time and also filling vacancies, so right now the flipping homes looks more desireable.
Buy and Hold, or rehab and flip?
Probably rehab and hold. Nothing like buying a property for pennies on the dollar, fixing it up, and getting a nice return on your investment each month whilst your loan is getting paid down by someone else and you get to reap all the tax benefits.
Wholesaling yields the most. It cost nothing but a few hours of your time, and you make a few thousand dollars. Rentals don’t yield enough to get excited about unless you have a significant amount of equity in it. That excitement goes away if you had to pay for that equity. Smart rehabbing means free equity, if you decide to sell it after completion or refi and rent, it might be something to get excited about. I think a healthy mix of the latter is the best, but maybe I’m biased.
Whenever asked this question, and I hear it alot, I think about how I first was “sold” on real estate investing.
“technically” When you buy a rental property, and amortize it like a bank would (say 20 years), and rent it out, and use your rent payments to pay off the principle (interesting this has become less common),
If you do that, over time you will own the house outright.
Even after 12 years in the real estate market, Ive done that.
Starting with nothing, leveraging myself in with “no money down” and now I own the properties. Free and clear, lots of them.
Having heard it as a young entreprenuer, trying it out, and now enjoying the spoils of success, (and notably watching as many of my “flipper peers” have fallen by the wayside) I think long term is the best way.
Well, you have to look at the difference between buying/holding and flipping.
One is a job, another is passive income.
Once you buy a rental property and put in place a management company, you get your checks monthly, etc.
If you are flipping, you constantly have to find new property. Now I do both, why? Because I enjoy it, and sometimes a home can flip and make money, but not make money as a rental.
Now, you state that you are having a hard time collecting rents. That is why you need to sign them up for direct deposit. Meaning you get them to sign an authorization that you pull the rent from their bank account each month. Works great for me!
That’s a good idea, Direct Deposit.
where can I get the best resources to learn property management?
Actually in Detroit, the best thing is to ask those there doing it. There is a TERRIFIC, and I mean terffic group up there.
WCRT DETROIT
Ask some of their members.
Hey thanks for the tip,
I’m within walking distance from this sat. meeting at a nearby coffee house. Thanks!
That’s not quite comparing “apples and apples”. Property management is a job just as project management is a job. If you opt out of an active management roll, someone’s still gotta do it. It’s not as passive as Robert Kiyosaki would have people believe.
detroitinvest, it would be great to see you at one of our meetings. You can visit our website and sign up for our weekly newsletter at www.WCRTDetroit.com to get updates and make sure the subgroups are meeting. There are many full-time investors, myself included, that are willing to share information and help you out. Expect to meet a lot of people and make great contacts at one of our meetings.
Danny, rental properties with management in place are truly passive. Sure you have to make some high level decisions on the houses but for the most part you’re collecting your check and depositing it each month. Property management is a job, which is why you get a management company or property manager to take care of that for you. This is speaking from owning properties that I manage and properties that are managed for me.
Jared Pomranky
President, WCRT Detroit
Jared,
Rehabs with management in place are passive to. Project management is also a job, which is why you get project managers to take care of that for you. My point was to say, you can’t call one a job and the other passive unless your treating them equally.
Focusing on the strategies that you enjoy is the most profitable.