The market is hot! The market is not! People are buying in the city! People are leaving the cities!
So who’s right?
With Covid-19 still casting doubt and fear into the hearts of some, uncertainty is unfortunately the new normal for many. If you ask 10 people what they think the market will do, you’ll probably get close to if not a 50/50 opinion on whether the market will be fine or take a dip. You can consider this article in the same light as you like but read on!
Many people want to flip a house. After all, it’s all over the TV shows. It looks fun. It looks inspiring. It looks motivating. It looks sexy and cool. For far too many, once they do get into it, they realize ‘oh wow, this is A LOT of work!’. Price point is largely irrelevant since the phrase ‘a lot of work’ is incredibly relative depending on who you ask.
What is far less sexy, attractive, exciting and amazing for most is owning a rental property. Let’s face it, the stereotypes are real. Such as:
- Messy tenants
- Entitlement mentality
- Cleaning toilets at 2 a.m.
- Entitlement mentality
- HVAC breaks in the middle of summer
- Entitlement mentality
- They will trash the place if they don’t pay rent and you have to kick them out.
- Did I mention entitlement mentality?
- And on and on.
However…they give you so many benefits. A good rental is a gift that keeps on giving! Such as…
- Depreciation year after year
- Cash flow!
- You can get tenants that actually do take pride in and take care of the property.
- Cash flow!
- Increased equity over time.
- Cash flow!
- The ability to do a 1031 exchange to ‘upgrade’ your investment. Think Monopoly…four green houses, one hotel.
- Cash flow!
Cash flow vs Cash drain. That is the difference in rentals vs rehabs for a lot of investors. You can absolutely make great money in flips but you can lose great money as well. While it can happen with rentals, the odds are much less likely. Tenants don’t tend to disappear too often. Most of them are grateful for a home. And it is well known that rentals are how wealth gets built over time by building up passive income.
So the next time you are looking to buy a flip, consider a rental instead. Or even a buy fix and rent property. You may be very well pleased and scaling that model gives you more and more cash flow, something no one will complain about!
Happy investing!