Investing in Real Estate

rent or flip houseSpend money to make money. If you find yourself with some extra money in the bank, you might be wondering what the best course of action is: should I save it or invest? Purchasing real estate has long been considered one of the best ways to not only own more assets but to also return a profit from them too. Flipping houses or purchasing homes for renting are the two primary ways to return a profit from real estate. Here’s some important things to consider to help you choose which path is best for your home:

Buy The Right House

It’s critical that you buy a house that's both daffordable for you and in a desirable location for the future renter or owner. Watch out for homes that are exceptionally cheap as they may just be desperate to sell. Bad neighborhoods, too expensive to repair, near a refinery, or on a flood plain are all legitimate reasons to dissuade someone from wanting to live there.

If you’re not planning on living in the home yourself, you need to make sure the home has the potential to attract the ideal buyer or renter in the future. If you’re buying a house, be sure the market is in a buyer-friendly area. If you’re opting to rent it out, be sure to scope out the local rental pool first to ensure it’ll be easy to find renters for now and into the future. Areas close to schools, universities, and metropolitan areas usually have a high demand for rental properties.

Homes for Renting:

Renting out your home is a terrific way to let the property pay for itself in the long-term. You can choose to be the property manager yourself, or contract the duty out to a property management team at a price.

Pros To Renting Your Home
  • You’ll have space for family or friends to rent out should they ever need it.
  • Once the house is paid off, you have the full value of the home as well as continued rent payment that become 100% income to you.
Cons To Renting Your Home
  • Finding good renters can be tough.
  • You are responsible, financially and physically, for any repairs or services needed to the home.

Flipping Houses

Always do your research prior to purchasing a home to determine whether it’s a good fit for a flip. It’s ideal if you have the knowledge yourself so you don’t have to hire anyone, but bringing on a professional building inspector or contractor will help identify hidden problem areas which could substantially add to the cost of repairs. Things like mold and rot in between the floors and walls isn’t obvious unless you know to look for them and are very costly to repair.

Pros To Flipping Your Home
  • Making cost-efficient renovations to major areas like the kitchen, bathroom, and flooring, can substantially increase the home’s value.
  • It’s a short-term project. It’s a lot of capital and work up front, but once you sell the property you’ll (hopefully) have more money in your pocket and be done with it.
Cons To Flipping Your House
  • You’ll need a fair amount of capital, time, and work to optimize the home to resell it on the market. Best case scenario, you have the money and the skills to do the work yourself or have good connections in the trades industry.

So, Should I Rent or Flip My Property?

It’s really a situational answer. Investing in real estate generally is a low-to-medium risk, but it can have big payouts in the long or short term if done properly. Ask any professional home flipper or rental manager and they’ll tell you that research is the key to returning capital from the real estate market. As always, we're happy to help answer any questions you might have about purchasing a home to rent or flip.

Posted by Mary Ann Castro on
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