Flipper vs. Landlord: What to Do With a Rehabbed House
Renting or selling a house can be a difficult decision. If you're not sure what to do, this article will help you decide which is the best option for your particular situation. There are many factors to consider when deciding whether to rent out or sell your newly remodeled fixer-upper, and we'll cover some of the most important ones in this article.
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Weighing Your Options and Making the Best Choice for You
Again, there are many factors that you must consider. A very important one is your personal finances and how much debt you're willing to take on. If you're good with debt and have the means to get a lot of money in the short term, then renting out your property can be very attractive.
Read on for more pros and cons of each option.
Pros and Cons of Renting
● Recurring income stream
● You have the option to do different forms of rentals, like short-term (i.e., daily, weekly, or month-to-month rentals) or long-term rentals
● Pay down the mortgage with rent payments
● Provide quality housing
● Dealing with tenants can be difficult
● Must be prepared for out-of-pocket costs if multiple repairs arise
● Need to build a team of contractors or spend a lot of time working on your properties
● Money can stay tied up for many years if the deal doesn't turn out to be great
Pros and Cons of Selling Your Fixer Upper
● Obtain a lump sum of money
● Sell your property for more than it's worth, letting you walk away with extra cash in your pocket
● No need for ongoing work and responsibility
● Need to market your home and deal with potential buyers
● No recurring income stream
● Must pay higher taxes on properties owned for less than a year
Landlording Comes With Many Time and Financial Responsibilities
If you decide to become a property owner, then you'll be in charge of dealing with contractors, managing repairs and maintenance issues yourself or finding someone reliable, and planning for future repairs that might cost more than the initial estimate. This can be anything from minor repairs like fixing leaky faucets to more major jobs like adding home security features and fence installation.
Responsibilities of being a landlord
Being a landlord comes with many responsibilities. It isn't as easy as collecting a rent check every month. Here are some common jobs you'll be responsible for:
● Repairs and maintenance
● Rent collection
● Hiring and paying contractors or completing the work yourself
● maintaining all licensing
● Scheduling with tenants for walkthroughs and contractors
You can, of course, hire a property manager to take care of these things for them because they're very busy with work or family. A property manager can also provide relief by letting you know when a small maintenance issue is growing into a larger one and needs your attention.
If you’re ready to expand your rental business, you may want to consider taking some extra steps like forming an LLC to protect your assets in case of legal action. You’ll also want to think about how you can market your properties and business—an attractive logo can go a long way toward making your business recognizable. Save time and money by using a free logo maker to design your logo. Once you’ve chosen a template, you can include your own colors, font, and text.
The Financial Implications of Renting and Selling Your Property
When deciding whether to keep and rent your house or sell it, you'll also need to consider the implications on your finances. These are some things to take into account.
Selling your house can be a very profitable one-time transaction. If you need cash to scale your business or invest in another opportunity, it may be better to take the cash up front and pay the taxes. Do note that your ROI will, of course, be contingent on the current performance of the local housing market.
Renting is a great opportunity to build semi-passive wealth. However, it's a snowball effect. Your first several rental properties will not generate a meaningful amount of income, so it's important to focus on the long game and building your portfolio.
If you're considering whether to rent out or sell your newly remodeled fixer-upper, take into account your personal finances and how much debt you're willing to take on, as well as whether or not you’re willing to take on more responsibilities as a landlord.
Article via Natalie Jones with Homeowner Bliss. Image via Pinterest.