In this segment of Property Management Tips we discuss the pros and cons of flipping real estate versus holding real estate long term as a rental property.
Some people set out to find a real estate investment to flip or turn into a rental. Other people inherit a home they don’t intend to live in themselves. While flipping is popular, there are several current advantages to hiring a property management company to rent out your investment property. Before hunting for an investment property or turning a home you own into a way to draw income, consider some of the advantages of owning a rental home vs flipping a house for a profit.
Making it less intimidating
Buying a home to flip or make a quick profit is an intimidating endeavor. Home flippers have to have a team of contractors and carpenters to finish the work as well as a solid financial budget. An easier way to get into real-estate investing is to buy a rental home and then hire a property management company. According to an article by The Seattle Times, two-thirds of people in the U.S. say investing in real estate is too costly or intimidating. Just 15 percent of people invest in real estate beyond the home in which they live.
Finding an affordable property
One of the main challenges of flipping or investing in a rental property is finding an affordable home. Although there were a lot of foreclosures on the market 7 years ago, most of those are gone. But higher prices affect the home flipper more than the rental property owner. Even though home prices are up, rental values are up as well. Experts believe rental prices will continue to go up.
Some investors chose live-in flips or homes they could reside in while they fixed them up. The problem is new tax rules changed so a live-in flipper would have to take 5 years instead of two years to avoid capital gains taxes. Ideally, find a turnkey ready home to turn into a rental house. Then, you begin immediately bringing in passive income. Owning a rental home also pays off at tax time because of the generous deductions.