rent or flip

[akw94]

Hi everyone,
I''ve been thinking for the last few years about buying a second property to rent out or flip for the profit. Anyone have experience in this? I know there''s so much involved and have done some research but always end up putting it off longer. I''m going to be selling my place in the near future and could potentially have $ for a down payment but am very unsure of which way, if any, to go.
In terms of renting, I like the idea of monthly $ although I think the likelihood of making a profit soon is unlikely. Also, I am planning to move out of state in a couple years so i''d sell then. Not sure if i''d really make enough to be worth it. In terms of flipping, I worry about buying in a not so good area and then doing all the renovating necessary. It could not sell or I run into many other problems.
Any experience??

 

[moremoremore]

Hmmm. Tough call. I guess it depends on whether you're thinking long or short term...also depends on where you live. Here in NY, it's not very likely anymore to find a nice piece of property to flip for profit. Maybe a few years ago...but not now. Then there is risk with renting if you couldn't make the mort payment if your renter skips on you....And it is VERY difficult to remove a residential tenant in a timely fashion. The courts do protect the resident. BUT, as my hubby says, no risk no gain....

There is an area in florida we are thinking about...it's a retirement community and the development actually helps you find renters (for a cut)...But I have to tell you I'm very nervous!

 

[Mara]

we're thinking about doing this, my dad went to a seminar on buying for investment and he may start doing it this year too...definitely out of state though, CA is too expensive...there are some hot areas that are supposed to be up and coming, we would plan to buy them then hold them and rent them (getting a management company to handle it for us) and then the idea is that this will supplement our retirement, aka if we can buy 1 every 5 years or so then when we retire we can start selling them off. one of my friend's parents did this and they are really reaping the rewards of holding them long-term. we're not so much a fan of the flipping, it's more risky than holding for long-term, IMO if you hold a property for ~20 years your investment will be more secure during the ups and downs if you can hold it and let it slowly climb.

 

[marvel]

Date: 2/27/2006 4:11:45 PM
Author: Mara
we''re thinking about doing this, my dad went to a seminar on buying for investment and he may start doing it this year too...definitely out of state though, CA is too expensive...there are some hot areas that are supposed to be up and coming, we would plan to buy them then hold them and rent them (getting a management company to handle it for us) and then the idea is that this will supplement our retirement, aka if we can buy 1 every 5 years or so then when we retire we can start selling them off. one of my friend''s parents did this and they are really reaping the rewards of holding them long-term. we''re not so much a fan of the flipping, it''s more risky than holding for long-term, IMO if you hold a property for ~20 years your investment will be more secure during the ups and downs if you can hold it and let it slowly climb.

I second this...if you can hang on to property (especially in California) for the long haul, you''ll make a profit!

 

[akw94]

Thanks for the advice! I don''t disagree about renting, however, b/c I don''t plan to be in-state too many more years, I don''t want the worry of handling a property out-of-state. For me, that would be too much. So given that, right now flipping is probably better, just a lot of risks. I think that when i''m for somewhere longer, I would like the supplemental income of renting so that I build the equity.
The idea of flipping is just very scary. On the other hand, I could buy and rent for the next few years and then sell. I''ve thought of that but not sure i''d make enough on the sale for it to be worthwhile.

 

[Dancing Fire]

Date: 2/27/2006 5:19:04 PM
Author: amy94
Thanks for the advice! I don't disagree about renting, however, b/c I don't plan to be in-state too many more years, I don't want the worry of handling a property out-of-state. For me, that would be too much. So given that, right now flipping is probably better, just a lot of risks. I think that when i'm for somewhere longer, I would like the supplemental income of renting so that I build the equity.
The idea of flipping is just very scary. On the other hand, I could buy and rent for the next few years and then sell. I've thought of that but not sure i'd make enough on the sale for it to be worthwhile.

amy
you're playing with FIRE!!! properties will be on a down cycle for the next 5 yrs.

 

[Dancing Fire]

Date: 2/27/2006 5:37:41 PM
Author: Virginia
Just my two cents, but I and my BF are both in the Real Estate business (he as a commercial real estate appraiser and myself as a mortgage processor) and I vote against flipping. The market is cooling off/slowing down in many regions (not all but quite a few) and it is hard to predict what is going to happen in the near future. It is harder to find a lower priced property to flip in the first place and making a profit is hard right now with the way the market is. It depends on where you live too, but in general I think flipping is not a good idea. I just got back from a business trip where we had a speaker from a company that does market research and analysis throughout the country and it was very interesting hearing where he thinks that market is going. Having an investment property is a good idea, in my opinion if you are planning to hold it for a while.

yep....the housing bubble bursted in Sacto,Ca area about 15 months ago.sellers can''t even give their house away now.

 

[coda72]

If you''re buying an investment property that you plan on keeping for 5 or more years, that may be a good idea. As others have said, the market is slowing, but it will come back. You should be able to make money if you hold onto it for a while.
Also, the maintenance of the property is a consideration. My husband and I own 7 investment properties, in the process of buying an 8th, and we rent them out. We often get calls from tenants about stuff that needs fixed, such as leaks. He is able to do the work himself, so that isn''t an issue for us, but having tenants can be a pain. You have to be able to fix things or have someone reliable that can do this.
Also, we have had trouble with tenants not paying rent on time. If you are relying on a tenant to pay the rent on time to make your mortgage payment, that could be a problem.
Investment properties can be financially rewarding, but they do take a lot of work, and it can be a while before you see any profit. If you''re in it for the quick money, this is probably not the way to go.

 

[Tacori E-ring]

Amy, this is what my FI does for a living and had been very sucessful at it. I think it really depends on where you live. He makes the decision to flip or rent depending on the house and the numbers. I think (I can''t keep track) he currently has 15 rental properties. He is doing his first flip as we speak. He buys foreclosures or destressed houses (never retail) and found a house in a very trendy neighborhood here in Charlotte. He is putting probably $30,000 into the house and is planning on listing it for a $100,000 profit. It is risky. But he never walks blindly into a job. He does tons of comps and research. It is a lot of work but it is his full time job. One of the reasons he can make money doing this is he does most of the work himself. When he does need to hire someone (roofer, or another trade...) he has connections who give him good deals. With the rental properties he morgages them for more than he bought it for to pull out his profit. Of course that only means he only get $100-$250 per property after paying his morgage, taxes, and insurance but for him he rather have the cash to buy more houses. I would suggest you really research areas, have a good agent, and look into foreclosures. When he is looking for houses he goes down to the court house almost daily to look in the public records. Also that is where the auctions are. He has also read books, gone to talks, and listens to anyone who has experience with real estate. He loves doing this. I tease him that his biology degree is really serving him well

 

[pinkflamingo]

be careful about renting... it is a lot of work and finding good tenants is difficult. make sure you read lots of books before you make a decision.

personally, i would look into investing elsewhere. i don''t think the market can sustain itself much longer and when everyone and their mother is cashing in you should proceed with caution.
JMHO.

 

[movie zombie]

Date: 2/27/2006 10:10:54 PM
Author: Dancing Fire

Date: 2/27/2006 5:37:41 PM
Author: Virginia
Just my two cents, but I and my BF are both in the Real Estate business (he as a commercial real estate appraiser and myself as a mortgage processor) and I vote against flipping. The market is cooling off/slowing down in many regions (not all but quite a few) and it is hard to predict what is going to happen in the near future. It is harder to find a lower priced property to flip in the first place and making a profit is hard right now with the way the market is. It depends on where you live too, but in general I think flipping is not a good idea. I just got back from a business trip where we had a speaker from a company that does market research and analysis throughout the country and it was very interesting hearing where he thinks that market is going. Having an investment property is a good idea, in my opinion if you are planning to hold it for a while.

yep....the housing bubble bursted in Sacto,Ca area about 15 months ago.sellers can''t even give their house away now.

DF, is that in all market sectors or just the high end of the market? just curious because i hadn''t read about it yet....not that i always see these things..... both you and i were at one point painted as being negative re the housing boom going to burst.

movie zombie

 

[Dancing Fire]

Date: 3/1/2006 1:24:18 AM
Author: movie zombie

Date: 2/27/2006 10:10:54 PM
Author: Dancing Fire


yep....the housing bubble bursted in Sacto,Ca area about 15 months ago.sellers can''t even give their house away now.

DF, is that in all market sectors or just the high end of the market? just curious because i hadn''t read about it yet....not that i always see these things..... both you and i were at one point painted as being negative re the housing boom going to burst.

movie zombie

MZ
there was a builder in Elk Grove,Ca about 10 miles from where we live. the builder sold a couple of new $600k homes for $450k.now..how would you feel if you paid 600k for the same home last year?

and your neighbor across the street just bought one for 450k

.

the housing market around our area has been slow in the last year, but actually top out about 15 months ago.i can feel it at that time b/c the for sale signs was hanging around too long and then reduce sign everywhere,that''s when i knew it was over (top out). it just hit the local newspaper. by the time news hits the papers you know it''s already old news.15 months ago when the market was hot, if the seller was asking $500k,the buyer would offer $20k more than the asking price.today,they can''t even give it away at $450k and the $800k homes, they can''t give those away for $700k.

 

[akw94]

Thanks for all the comments. It sounds like before doing anything, I need to do a lot more research. That''s partly why i''ve put it off, b/c I just didn''t want to take the time to research and knew I couldn''t make decisions w/o it. Given my weird time frame, it does sound like I may want to do something other than buy property at the moment. I''ll have to check in my area, but I do know sellers are having a harder time selling, things taking a lot longer than they were even a year ago. I would hate to be in that position when I move out of state. Plus, i''ll already have my own property that i''ll have to sell. This does concern me a little though b/c i''m selling my place this summer and hoping to make a profit in order to get something bigger. I sure hope it works out. Now, i''m just not sure what to do w/the money I make as profit when I sell. I want to put it to good use but not sure the best way. I suppose I could just stick it in a mutual fund.

 

[movie zombie]

DF, i know elk grove well....i'm originally a central valley girl! born in stockton....oh, lucky me....and raised in the area.

how's the sale of older homes doing?

builders take a risk...along with the bank...when they build on speculation. and that's what they've been doing for awhile now as far as i'm concerned.

eta: yeah, i'd be pissed if i had bought a year ago in your area....but no one would have forced me to buy so its my own problem. we bought another place here in the scruz mountains 2 years ago and its still going up in value. but that too will cease and desist. i don't buy for hope of profit: i buy to live where i want to be in a home i want to be in. i would prefer my property not go down in value but i'm in it for the long haul. our little box of a house in chico is paid for.

movie zombie

 

[Dancing Fire]

Date: 3/1/2006 11:47:58 AM
Author: movie zombie
DF, i know elk grove well....i''m originally a central valley girl! born in stockton....oh, lucky me....and raised in the area.

how''s the sale of older homes doing?

builders take a risk...along with the bank...when they build on speculation. and that''s what they''ve been doing for awhile now as far as i''m concerned.

eta: yeah, i''d be pissed if i had bought a year ago in your area....but no one would have forced me to buy so its my own problem. we bought another place here in the scruz mountains 2 years ago and its still going up in value. but that too will cease and desist. i don''t buy for hope of profit: i buy to live where i want to be in a home i want to be in. i would prefer my property not go down in value but i''m in it for the long haul. our little box of a house in chico is paid for.

movie zombie

MZ
i don''t know about Stockton prices but Lodi

no matter old or new homes.the party is over!!! in the Sacto area. there''s no way the avg income couple would able to afford the housing price here

something got to give.there''re many Ca state workers here,on the avg i would say they probably make like $3500-$3700 per month.

 

[movie zombie]

DF, it really is bad in sacto then... i know a lot of people that moved from the bay area to your area because they could ''afford'' to buy a house. now they''re in homes that aren''t worth as much as they paid. i hope they love those hot summers!

movie zombie

 

[Dancing Fire]

Date: 3/2/2006 12:40:23 AM
Author: movie zombie
DF, it really is bad in sacto then... i know a lot of people that moved from the bay area to your area because they could ''afford'' to buy a house. now they''re in homes that aren''t worth as much as they paid. i hope they love those hot summers!

movie zombie

well....if they sold their expensive home in the bay area then they wouldn''t have a problem affording a home here,with money left-over.

 

[movie zombie]

no, these are younger people just wanting to get into something ''affordable''...which they could not do it in the bay area. remember: not everyone makes tons of $$$$ here. some still make the commute and stay with famiily/friends here during the week.

movie zombie