Investing in properties has been a scary topic for some in the past. Now, it’s the new craze! There are house flipping shows all over the cable networks. The hosts make it look so easy. Truth is…it is. All it takes is some guts and a little money.
There are many elements of investing and flipping that people have to consider before taking the plunge. First, how to find the properties. Second, are you going to keep the property or sell it? If you’re going to keep it, who’s going to manage it and how? How will the property be maintained? Remember, you’re at the mercy of the leasing market. Also, who will screen prospective tenants to be sure that they are quality, long-lasting tenants? Lastly, and most importantly, how are you going to finance the transaction?
These seem like daunting thoughts, but don’t let them be overwhelming. There are answers to all of these questions. My first suggestion is to partner with a realtor. Form a good, professional, and strong relationship with this person. They will help you tremendously, and in turn, you will help them. Next, if you’re going to flip the property then you already have your realtor to list it for you. If you decide that you will keep the property, you must decide if you are able and willing to manage the property yourself. If not, research property management companies in your area. Get someone local. It’s no good to have to deal with someone out of town or state that you haven’t met in person. The management company you choose will be able to screen prospective tenants. They are experienced at this and their judgement can usually be trusted. Finally, if you’ve saved money…great! If you haven’t, you’ll need to work with a lender. Remember, if you are flipping, you’ll need to pay the mortgage, taxes, and insurance during the remodel time.
Some of the benefits of investing are ongoing cash flow (if you keep the property), more predictable income, tax benefits, appreciation (loan goes down, value goes up), inflation will help you, and you can improve the product and charge appropriately. Especially if you are flipping.
If you decide to keep the property and it’s managed well, your potential income is going to be predictable each month. This gives you some stability you may not otherwise have if you’re flipping. If you decide to flip, you’ll need to budget much more carefully. You’ll have to count the time it takes to purchase, improve, and sell the property. Stretching a dollar comes into play here. If you lease the
property, your loan goes down quickly while your value goes up. “An inflation hedge typically involves investing in an asset that is expected to maintain or increase its value over a specified period of time” (Investopedia.com). This is a huge benefit to leasing your improved property.
All in all, investing is a good idea. A great realtor and a great management company are a must. Also, it’s fun! Improving something that is outdated or damaged can be very satisfying. Keep watching Joan and Chip…you’ll want to jump on board too!
Inflation Hedge Definition | Investopedia http://www.investopedia.com/terms/i/inflation-hedge.asp#ixzz4IwUO9N5O