Little Rock, AR · Member since 2014 · 11 posts · 3 votes
Hi BiggerPockets community,
My name is Monica. I'm in the Houston area. I'm a notorious lurker, so it's a bit of a shock to my system to emerge from the shadows, but I'm happy to do it. I wanted to first off thank you all for the wonderful guidance and advice that I've gained from the site over the last few months. It really has been invaluable. As far as my real estate experience, I own six rental houses and manage nine others for my mom. Sometimes I feel like this is a piece of cake while other times I think, there's gotta be an easier way. I've also begun to explore flipping as well. My goals are to figure out how to take the headache out of managing and to also get my feet wet enough in flipping to see if that is the better avenue for my real estate investing. To flip or to hold? That remains the question. Or maybe a combination of the two. Anyway, being here will certainly help me figure it out. Looking forward to growing and prospering with you all.
Involved In Real Estate · Hyattsville , MD · Member since 2011 · 298 posts · 256 votes
12y
I am a full time rehabber and I have been a landlord since 2002. Every side has its advantages and disadvantages. Rentals for me are easy money, I collect my rent- hope I don't get a phone call for the month about repairs, wait and collect rent next month.
It is however not a road without potholes- I've had tenants who left me with roaches falling from the ceiling when I open the front door. I've had tenants who paid me 6 months in advance and I wish they would never leave. I've had tenants sue me for 15k after spending one night in my house. I've had tenants who left and I didn't even know house was empty.
On the rehab side - I like rehabbing only because it lets me get creative, I can do amazing kitchens, I get to use my staging chops and buy new furniture. But again it is not road without potholes. It takes A LOT more money and it is a JOB sometimes it is a 8am to 10am job, sometimes it is a 7am to midnight job. Some houses are money pits and you just keep throwing money into it without an end in sight.
I have a house right now 30k into it and I don't even have tile bought or installed. After you open up the walls you find knob and tube wiring, rotted floors, busted plumbing, mold, structural issues. (Just giving you a general idea).
You then have to deal with bad contractors, sub contractors, real estate agents, appraisers, home inspectors, homebuyers who sometimes want the PERFECT house and send you everything that a home inspector even remotely mentions whether it is tiny or not. Sometimes you go thru several contracts to close one house- One house last year I think I went thru 4 contracts before the house finally closed. One of the contracts was cash with no contingencies and still didn't close- GO FIGURE.
I'm making the point that each avenue of investing has its advantages and challenges. If buy and hold was so easy everyone would do it. If flipping was so easy everyone would do it.
SFR Investor · Dallas, TX · Member since 2011 · 604 posts · 243 votes
12y
flipping can be a well paying job, but its a job, if you stop flipping, your revenue stops.
I am a buy and hold investor, but am considering adding doing some flips,,,it seems some combination of the two would actually be the perfect plan. If someone doesn't have a 'real' job and doesn't have enough rental property to handle that full time, then do a few flips to supplement your income and take up some extra time
Little Rock, AR · Member since 2014 · 11 posts · 3 votes
12y
Dell,
Thanks so much for the response. I get really tempted to just chuck the rentals as well and start afresh flipping. I'm pretty sure I would have a better return on my investment, and ultimately there would be nothing stopping me from going back to rentals if I chose to down the line. I think that ultimately, though, that would be a bit drastic for me (I hate to reverse course after all the time and energy invested in them). If I can figure out how to manage them with a little more ease while flipping occasionally, that might be the right solution.
Andy,
Thanks a bunch for responding. The only thing is that buying and holding has felt like a job too...with a lot less profit. Long term I suppose it pays off, though, and, again, hopefully I can start implementing some of things I am learning on the site and really turn the rental income into passive income.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
I did both for awhile too.
My considerations were based on several factors.
Location: What was more appropriate in that area? Is it primarily an owner occupied area? In some neighborhoods rentals are frowned upon, for many of the same reasons many condo developments require owner occupancy. Those are flips.
Locations for a good rental will be an area that can carry market rents for the size, style and amenities. Demographics will support the rental.
Equity: If it's a thin deal and would make a good rental it went to rental side. Held for cash flow, taxes and appreciation to a more profitable position. If there was the opportunity to force appreciation or more value it was a property to be sold off.
Use of capital and leverage. Again, highly leveraged deals have little equity, that leans to leasing. If the return on the capital tied up in the property was not yielding the required return, estimating and including the appreciation, then out the door it goes.
Condition: I didn't want repairs or constant maintenance, the property had to be rentable without much improvement needed, if more improvements were needed, then that work was basically placed at risk in leasing. Wear and tear or possible damage was considered and if significant work had been done it was flipped.
Holding period: Consideration was given to depreciation and the after tax position usually begins to fall at some point, about 7 to 8 years and in consideration of major repairs expected. For example, if I got a house that had a 7 year old roof then in another 8 years the economic life of the roof may be nearing the end and replacing it means adjusting depreciation but having more capital injected as well. At that point they would generally be sold off and move on to a newer/another property. So, I didn't fall in love with too many properties, they all moved through a holding period to a sale.
This is just skimming over my considerations. While most know what they want to do with a property before they consider it, I was in a different position. For those who don't know, I was a lender or guarantor in transactions so default often dictated what I was taking on. Let make it clear, such were acquired by a deed in lieu of foreclosure, not from foreclosure sales! :)
Real Estate Investor · Member since 2013 · 866 posts · 487 votes
12y
Rehabbing and flipping are jobs. For some they are really good jobs. But, as Andy pointed out, you are still trading hours for dollars.
Investing is different. If you structure your holdings correctly you can build to the point where you make money no matter what you are physically doing with your time.
Neither is right for everyone. Everyone walks their own path.
SFR Investor · Dallas, TX · Member since 2011 · 604 posts · 243 votes
12y
I actually buy my rentals in neighborhoods that they are 'frowned upon', I want rentals in areas that 90% of the properties around them are OO. I don't have a problem with vacancies probable because of this.
Bill made some great points on which one is dependent on the house. If I ran across a $200k house that was a steal, I would never consider that for rental, but I would for a flip, same with a house with a pool, I have one house with a pool and have great tenants that take care of it, if they ever move I will probable sell it
It also has a great deal to do with time, if you are working full time and investing in RE, flips take a lot of time, rentals not so much.
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
I started out with high yield rentals and still have a good number. I've been selling some and only buying ones that meet a very strict criteria. I've flipped a few alnong the way, but now I'm spec building new homes. Really, the same as flipping, but with more scope, time, and dollars. That's my main focus now.
When I'm ready to retire from the flipping/spec job, my plan is to acquire long term rentals (mostly commercial) that; 1) require little management from me, 2) great locations with better chances of appreciation, 3) Have lower yields because of the first two points. Not that low yield is a goal, but comes with the territory.
So I'm in the middle stage of my long term 3 stage plan. I expect to make the transition to part 3 at the next real estate/economic downturn. Maybe something similar would work for you.
Involved In Real Estate · Hyattsville , MD · Member since 2011 · 298 posts · 256 votes
12y
I am a full time rehabber and I have been a landlord since 2002. Every side has its advantages and disadvantages. Rentals for me are easy money, I collect my rent- hope I don't get a phone call for the month about repairs, wait and collect rent next month.
It is however not a road without potholes- I've had tenants who left me with roaches falling from the ceiling when I open the front door. I've had tenants who paid me 6 months in advance and I wish they would never leave. I've had tenants sue me for 15k after spending one night in my house. I've had tenants who left and I didn't even know house was empty.
On the rehab side - I like rehabbing only because it lets me get creative, I can do amazing kitchens, I get to use my staging chops and buy new furniture. But again it is not road without potholes. It takes A LOT more money and it is a JOB sometimes it is a 8am to 10am job, sometimes it is a 7am to midnight job. Some houses are money pits and you just keep throwing money into it without an end in sight.
I have a house right now 30k into it and I don't even have tile bought or installed. After you open up the walls you find knob and tube wiring, rotted floors, busted plumbing, mold, structural issues. (Just giving you a general idea).
You then have to deal with bad contractors, sub contractors, real estate agents, appraisers, home inspectors, homebuyers who sometimes want the PERFECT house and send you everything that a home inspector even remotely mentions whether it is tiny or not. Sometimes you go thru several contracts to close one house- One house last year I think I went thru 4 contracts before the house finally closed. One of the contracts was cash with no contingencies and still didn't close- GO FIGURE.
I'm making the point that each avenue of investing has its advantages and challenges. If buy and hold was so easy everyone would do it. If flipping was so easy everyone would do it.
Realtor · Great Falls VA · Member since 2013 · 71 posts · 16 votes
12y
Now my answer is admittedly going to be theoretical, I only have one rental property… That reflect property.
But in my research and coming up with my strategies here is what I think:
1. whenever you purchase a rental you need to make sure that the numbers work and that you have room to have a property management company handle the rental for you. The process needs to be systemized… So that it is not taking time out of your day, and you're not the one answering phone calls at two in the morning.
2. You need to think in terms on the return on investment. If you can earn anywhere from 18 to 25% on your money, then initially you will have your money back within a short period of time. Then future cash flow is nothing but a profit. In other words of infinite return on your money.
3. I think that if you are getting into the rental game, it needs to be a long-term commitment with a lot of rental properties… So that the passive income ends up being something significant enough for you to reap the benefits when you're ready to retire.
4. I think that flipping is a great way to begin and can be important in providing the Capitol for your rental investments. In the end flipping is a business that takes your time so when you stop the money stops. This is why I think flipping will provide the money to build the investment portfolio
Tis is my view, but I am a business owner and my end game in real estate is to be able to go on vacation and not have my income effected. I think the only way to reach that goal in real estate is going to be rentals....or note investing.
Hope this makes sense...just my .02
Sent from my iPad so please excuse any spelling errors.
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
12y
Hey @Monica M. Thanks for jumping in and introducing yourself! If you haven't yet- be sure to setup some "Keyword Alerts" to get into conversation in your target area.
Also regarding your question, you may want to ask it in the forums, there are tons of people willing to help. I believe we have tons of articles about the topic as well.