Thread: Rent or flip?

Originally Posted by Snarg

In regards to making profit with the least ammount of pain, what is recomended, renting or flipping?

Hello Snarg, long term, renting your unit out gives out the best gains. However, flipping is good for fast cash. If you want to maximize your tax gains and accumulating wealth, I would choose renting instead of flipping...

Pyriel

I had a rental for a couple of years now and it's not a comfortable ride. Of course living two states away makes it difficult to watch. If I was in the neighborhood I would probably like it a whole lot better. I've been lucky so far and have not had to spend any cash on repairs or upgrades and have had good tennants, but none for more than a year.

Pyriel has a couple of good points on fast cash vs. long term wealth. Of course if you can live in the rental for two years before selling you can avoid the capital gains tax, which is what I hope to do.

I've never flipped one so I really have no experience to share there...

Good luck.

Originally Posted by pyriel

renting your unit out gives out the best gains.

I do like the idea of long term gains however, I don't know how keen I am on having to deal with tennants. Should my wife and I decide on this direction, where would you recomend I start conducting research on things like landlord laws and anything else that pertains to rental properties...?

Originally Posted by pyriel

However, flipping is good for fast cash.

And another good point. Who doesn't like fast cash?

Another idea we have had is flipping one or two houses to get the capital to start long term renting. When it comes to flipping, is there a guru that you know of on these forums?

Originally Posted by Tri-ing

I had a rental for a couple of years now and it's not a comfortable ride.

I think, ultimatly, it is going to come down to our comfort level. Before we decide to do something like that I know I am going to have to do a good bit of research. Do you know where I could find some information on how to deal with poor renters?

Originally Posted by Tri-ing

I've been lucky so far and have not had to spend any cash on repairs or upgrades and have had good tennants, but none for more than a year.

And, knowing my luck, I'll end up with some terrible renters

Originally Posted by Tri-ing

Of course if you can live in the rental for two years before selling you can avoid the capital gains tax, which is what I hope to do.

Not a bad idea however, who knows what the housing market will be like in two years. I would hate to get stuck with a house that won't sell.

Originally Posted by Snarg

I do like the idea of long term gains however, I don't know how keen I am on having to deal with tennants. Should my wife and I decide on this direction, where would you recomend I start conducting research on things like landlord laws and anything else that pertains to rental properties...?

I think, ultimatly, it is going to come down to our comfort level. Before we decide to do something like that I know I am going to have to do a good bit of research. Do you know where I could find some information on how to deal with poor renters?


Not a bad idea however, who knows what the housing market will be like in two years. I would hate to get stuck with a house that won't sell.

I was clueless when I got started and actually bought the house intending to live in it. When a job fell through, I decided to rent. And since I was moving out of State, I did it the easy way: I found a property manager to handle it.

The rental laws vary from State to State. My rental is in California where laws tend to favor the renter. Another reason I found a property manager that had a good reputation in the local community. I have a friend that has lived in the community for many years and was able to point me in the right direction for my property manager. When I sat down and interviewed her (I recommend you do this face to face, I sat with 3 different property managers to get a good perspective of their experience, styles, and successes) she seemed to have the right experience and has done well for almost three years now.

Sorry I can't be more help in pointing you to the research, I haven't done any myself, left it all up to the property manager to handle. The rest is dumb luck.

If you want to see what the real estate market COULD do, just check out Detroit.

Where I am, housing is crashing big time. Houses can be found for pennies. Literally.

http://news.yahoo.com/s/nm/20070319/...ime_detroit_dc

Originally Posted by James48843

If you want to see what the real estate market COULD do, just check out Detroit.

Where I am, housing is crashing big time. Houses can be found for pennies. Literally.

http://news.yahoo.com/s/nm/20070319/...ime_detroit_dc

Read that article yesterday.

Very sad, and very scary!

We need to be cautious with our investments. Educate yourself and start up small before you jumped into RE investments. This will be my advice to anyone that would like to try RE. I have a friend that I grew up with that now lives in California. He bought a fixer upper last year for 575k and pumped in about 200k to renovate it. From what I gathered, financing for 575k is for interest pmt only. I believe he also leveraged his home my taking out equity loans. I saw the house last year when I passed by over there. However, the house, up to this point of time is still in the market. I'm not sure if anyone is paying attention on what is going on in RE within the country and CA is currently on a slump.

A real estate agent friend of mine had informed me that they are seeing Hawaii to be next and their slump might start happening late of this year or sometime next year. This means that there might be buying opportunities out there sometime soon. I am also seeing a slow down in RE rentals in Guam and truly believe that we might be seeing some slowdown sometime next year. There are so many specualations about the marines coming to Guam but those will not materialize until about 3-5 years from now. I'm just glad that my target market is still strong for my rental properties (Section 8).

Given these facts, I strongly believe that now is the time to start raising cash. I am still closing on a property on Monday but had informed my RE agent that I am backing out from my position to purchase a 260k brand new house which is supposed to be completed at the end of this year.

Please always educate yourself and ensure that you know what you are doing before you go into RE investments. It can be lucrative but it can also be unforgiving.

Originally Posted by Tri-ing

When a job fell through, I decided to rent. And since I was moving out of State, I did it the easy way: I found a property manager to handle it.

How much does a property manager cost you? If the manager represents a larger company, do you still interview the individual?

Without a manager, how do you deal with reluctant renters? Anyone happen to have a handy link to rental laws in Washington state?

Thank you for all of the information already provided.

All this talk about short term-vs-long term investing without any talk about risk exposure?

Comparing the potential dollar returns between the 2 without accounting something for risk isnt looking apples to apples...

Originally Posted by ChemEng

All this talk about short term-vs-long term investing without any talk about risk exposure?

Comparing the potential dollar returns between the 2 without accounting something for risk isnt looking apples to apples...

By all means, educate me kind sir.

Let me start by saying that Im not a real estate expert. I have had several graduate finance classes though, so that is where my comment is stemming from.

The idea is that youcnat just look at the potential returns of 2 investments without incorporating some measure of the different levels of risk between the 2 investments. Make sense?

If not consider this scenario between 2 investment options: 1 investment offers a potential 100% return. The second option offers a potential of only 5% return for the same period. Which one would you choose?


The answer is that you cant really tell given those data points. If the 100% return comes from a short investment at the roulette wheel, then the additional risk involved with the investment should also be considered when evaluated the 2 options. Likewise, if the risk is approximately the same between the same 2 options, then it would *probably* make the most sense to maximize the percent return.

The way that I read your question is to make a recommendation between staying in an investment long term versus staying in it short term. Now even if they offer the same positive cash flows, you have to account for the additional risk that is associated in staying in the investment longer.

Using the analogy from above, would you use the roulette investment option that offers a potential $10k return over some other option that offers the same potential $10k return for the same seed money and less risk? Probably not.

Given the housing situation you provide, there is risk that is associated with staying in the property long. The potential of going periods without renters, the potential of the house's value dropping significantly, the potential for the maintenance/repair cost of the house to exceed what profit you are making, et al.

To accurately compare the choices, you need to consider your tolerance for risk given the additional length of time you will be in the investment and then adjust the cash flows appropriately to compensate for taking on the additional risk.

If this doesnt make sense, let me know.

(I hope this wasnt too wordy. The beers from the evening are kicking in full effect now and the gears in my head are moving a bit too freely.)