Fix & Flip vs. Buy & Hold Rentals
When it comes to homes for sale College Station is one area where there are investments waiting to be made. The big question for new investors is: Which real estate strategy will work for me? Some may want to buy a piece of property, fix it, and rent it out while waiting for a really good time to sell it. Others might think of buying a property, fixing it, and flipping it as quickly as possible. Here’s a quick look at these two real estate strategies.
To be sure, the fix-and-flip method has a lot going for it. For one thing, if you make $30,000 to $50,000 in six months or so, in less than a year, you would earn more than what savings interests will yield. Apart from the quick cash, the fix-and-flip method has other distinct advantages.
• Selling the property quickly means not being subject to major turns and fluctuations in the market. The assumptions you make regarding the future price of your property will probably hold true.
• This method also means you don’t have to find good tenants, or keep the property well-maintained, or possibly carry out evictions.
While fix-and-flip is an attractive way to make a considerable amount of money within a short span of time, this method does have its disadvantages.
• Sometimes, the repairs a property needs far exceed the projections made by buyers. Plumbing problems, zoning issues and other similar concerns may take more capital than anticipated.
• Until the house is sold, you foot all the bills and the cost for maintaining it. These increase the actual investment you have to recoup when you finally sell.
How to Make This Method Work for You
There are some things you can do to shore up your chances of making this method pay off for you.
1. Inspect the property carefully before you make a purchase. Get expert help so you can look at all the possible problem areas that might make this a poor investment.
2. Don’t forget to add the monthly mortgage payments to the amount you are actually investing.
3. Carefully calculate your selling price to include taxes. Remember the taxes you have to pay will partly depend on your state’s tax code.
Buy and Hold Rentals
Buy and hold rentals may not offer quick returns for your money; nevertheless, they are traditionally a stable way of building up your estate. Moreover, you will probably make a sizable profit at the end of this long term investment. In addition, buy and hold rentals offer other benefits for investors.
• If you rent the property out at a good price, and if the monthly rent exceeds monthly payments (the mortgage, insurance, and taxes you have to pay for), you will have a good source of steady income.
• You won’t have to go through the exciting but stressful challenge of waiting for a buyer. Buy and hold rentals are there for the long haul so you don’t need to worry about getting offers ASAP.
Many people have made good money with buy and hold rentals, but this method is not without its share of concerns.
• The burden of being a landlord falls squarely on your shoulders. You will have to find good tenants, make repairs, collect rent, and deal with all the issues that landlords deal with.
• You can be vulnerable to downturns in the real estate market. It is possible that real estate prices could suffer from one crisis or another, and you would either have live through it or sell for less than you thought you could.
How to Make This Method Work for You
The buy-and-hold-rental method has proven effective in creating assets for millions of families. Here are two important tips to make sure it can work for you as well.
1. Buy property in neighborhoods that will attract good tenants. This is vital to making sure you have the funds for the monthly mortgage without drawing on your own funds or your credit card.
2. Make sure your finances will allow you to hang in there for the long haul. Base this investment on sound financial projection rather than optimism.
3. Be sure you can handle future balloon payments scheduled down the road. Know how you will sustain payments until the big sell comes along.
Which Method is Better
The method that works better for you depends on how well you think you can handle the disadvantages they come with. When you decide, take into account your personality, the state of your finances, and your ability to rise up to the challenges that each strategy will bring to your door.