Which is a better investment renting properties/buying fixer uppers and selling for profit? exp'd only reply

Answer 1

It depends on your goals. Rentals are a long term investment and you are looking at accumulating multiple properties where the rent carries the mortgage and other costs. Down the road you can sell for taxed advantaged gains rates.Buy, fixing up and selling is a short term business that can be either ordinary income or capital gain depending on the frequency of the activity. Either way you carry the costs and pay tax sooner.

Answer 2

These days, landlords can be hosed bad by renters who refuse to move. Tenants can simply ignore 30-day eviction notices and wait for you to get the sherrif to move them out. So I wouldn't rent if my life depended on the income.

But it's certianly easier than remodeling on your own, and you get income right away.

I remodeled my home. I bought for $66k, so far I've put about $16k into it and plan about $4k more and it will be ready to sell for between $125-150k. (My neighborhood won't allow a higher price than that. I'm keeping an eye on other houses within a few blocks and what they sell for, and that's how I know what the market would bear for mine.)

When you go into it, you have to realize the difficulty of some projects. Personally, I wouldn't try to sell a home unless it had a 200-amp service box, plumbing that worked, a roof that could be ignored for 5-10 years, a new kitchen and a new bathroom. Those are the things that will sell a home or let it sit on the market for months or years if they're not up to par.

The $16k I mentioned has paid for complete replacement of a fuse box and 100-year-old wiring, new floors everywhere (Pergo and 20-year carpet), 2 automatic doors on the garage, a sliding glass door, and new drywall in a lot of places (plus the cosmetic stuff). I had an electrician do the box, grounding and GFI outlets in two rooms and I did the rest of the house myself.

I could have had the house done in 6 months working full time. Instead, I put about 4 months into it (and got it about 80% done), then went back to school and did little projects on the weekends. I haven't done the kitchen and bathroom yet. I'm waiting to see how I do on the CPA exam since it's going to run me over $1000 by the time I'm finished.

Answer 3

I don't think one is better than the other. Flipping for quick cash...rentals for long term. Really depends on your goals.

I personally invest in rentals because I'm focusing on the long term.

I know another investor who does both...he'll fix and flip two or three and then hold the next one. His philosophy is this...if he only does flips....he has to always work. If he doesn't flip, he makes no money.

By holding on to every other house, he is building his residual income which will continue to come in whether he works or not.

An excellent strategy and one I hope to implement once all 3 kids are in school...too hard to rehab a house with a 4 year old in tow.

Answer 4

If you compare high quality, well situated investment property, whatever that is to you. To knock down drag out fixers. Well the investments will be better.

It just depends upon who you are. Can you swing a hammer and repair various property flaws on your own? If you are going to do fixers and call a pro for each needed repair you won't make out. Not enough $$ to do it that way.

I for one just DETEST tenants. I've had all that I can stand of tenants destruction and late/non paying. So I like fixers. It is largely just me against myself for the outcome. Sure the market matters, but I can sort myself out in most markets.

When you say "exp'd only reply" that is a good forum. But do you then suppose that a brief answer from said person will allow you to duplicate their efforts? Be careful investing in real estate. Most all of the "hype" is just that. The people yacking the loudest about their great success in the real estate game haven't been in it long enough to have even come around to paying the tax man on their new found "wealth".

Repeatedly I see people start off Jan. of any year buying, fixing for a few mos. then marketing the home for a couple of mo. then under contract for a few mos. then close the sale. They can repeat this 3 times a year. They can make cash to them at the close of the deal(s) $30-50K They will then say I'm making $50K on each one. But they haven't deducted the monthly mtg payments for the time they carried it, the costs to renovate it, the materials, the time and labor costs. So let's say they do all the work themselves. $15K is all that they spend. So now we deduct from their $50 the 15K now we have 35K remaining.
Then finally in April of the following year they go see tax man. That's when he informs them that they owe at least 25% of the sales price on the sale of the property. If the sales price is 225K and they paid 175K the tax is around 13K now they are down to $22k but if they do 3 of them and now they are in a higher tax bracket, since hubby still has his job or wife has hers, or both. Now they pay 35% on the income from the fixers. That's $17,5K from the 35K now they've really made 17,500. per fixer.
for all of the time and money spent and the risk factor.
Just do a few and see if 17K is enough for you to slave away for 1/3 of the year. On top of your regular job and raising kids and taking care of your own house. whew...

And these are just the ones that MAKE money. Many don't make a dime. some even put their own home at risk to seek their fortune flipping. It gets really really bleak.

Real estate investing is for real estate investors. Study long and hard before you part with your money to put it into the real estate game.

Sincerely best of luck,

Answer 5

Leasing is better. You get more money over time depending on the quality of the land. My grandfather leases to Home Depot, he gets 100,000 a month.