4 Reasons You Shouldn’t Write Off Renting-Out
Are you a real estate investor with a real estate investment business built on rehabbing and flipping properties? Do you consider yourself successful? Even if you are highly-successful at buying homes well below market value, rehabbing those houses and selling your investment for a large profit, you always need another exit strategy in your back pocket.
There are numerous strategies for building a sound business and making money when investing in real estate. And smart, successful real estate investors like yourself understand that there are times when another exit strategy makes more sense. In our latest blog post, we are going to discuss four reasons why some fix and flip investors decide investing in rental properties is the exit strategy of choice.
Monthly Residual Income
Ask buy and hold real estate investors why they choose this strategy and most will tell you they love receiving monthly rent checks and watching their equity wealth grow daily. Investing in rental real estate allows you to receive regular, monthly cash flow without working a job to receive this income. And what can you do with this residual income? You can use that money to cover expenses while you are waiting to flip your next house, to pay monthly loan payments on a finished – but not sold – home, or to purchase your next investment property to fix and flip.
Successful investors follow real estate market trends and economic conditions. As a rehab real estate investor, you may find yourself unable to sell a property due to market conditions taking a downward trajectory. If you don’t want to find yourself paying high-interest hard money loan payments month after month, then you need to consider another option. In this scenario, renting your home while waiting for the market to rebound makes sense. And if you consider this exit strategy when putting together your purchase offer, then you should be able to rent your house at a rate that covers your monthly payments.
Supply and Demand
Another market condition which could affect your decision to forgo fixing and flipping your real estate investment is one exactly like the scenario we are seeing in today’s market. After years of record-setting foreclosures and tight-lending restrictions drying up mortgage options for buyers, investing in rental properties is now the smart play for real estate investors. The demand for rental homes is outpacing the supply of houses for rent which is putting landlords in the driver’s seat and sending rental rates higher and higher.
Have you dipped your toes – or possibly dove headfirst – in the fix and flip pool but did not find the experience enjoyable? Many investors discover they do not like the unknowns that come with rehab real estate investing. In that case, you may find the buy and hold strategy a more comfortable fit with your investor mindset and personality. While you will need to deal with tenant issues and home repairs, renting your investment property offers less monetary risk and uncertainty in the short-term.
No matter what real estate investing exit strategy you choose, make sure you always leave the door open to multiple scenarios before making your purchase offer. Otherwise, your career as a real estate investor could be short-lived.