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Old 02-21-2021, 07:10 PM
 
Location: DMV Area/NYC/Honolulu
22,962 posts, read 10,985,777 times
Reputation: 22996

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Quote:
Originally Posted by adjusterjack View Post
Because tenants can often be a royal pain in the ass and cost the owner a lot of money when they damage the property and skip out on rent.

I did OK financially having 3 rentals for 20 years and was able to parlay the equity into buying my own house for cash.

But I had a lot of grief along the way and was happy to get out from under.

If I knew then what I know now, I would go the flipping route. I did a lot of my own work on my houses back then. Probably could have made some decent money flipping houses a few times a year without any of the hassle of dealing with tenants.
I point that is amplified during the period of Covid eviction protections. I would not be looking to get into the rental business today.
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Old 02-22-2021, 08:23 AM
gg
 
Location: Pittsburgh
21,995 posts, read 21,169,667 times
Reputation: 14338
Quote:
Originally Posted by tommy64 View Post
Why would someone buy a house to fix up and sell for a quick buck when they could keep it as a rental and take a slower but steady income, plus any equity capture as any loan principal pays down and values notch up?

The acquisition costs, fix-up costs, closing costs, capital gains tax and risk if anything falls through looks like a short-sighted way to make (in many cases) no more than a General Contractor.

Real wealth is built over time as assets appreciate in value. Rents almost always increase. Real estate is easy to borrow against because of the self-collateralization. How much better does it get? Why would anyone let something so valuable go for a quick hit of cash?

Any thoughts from the flipper crowd?
I have flipped plenty AND rented some. I am done with being a landlord and don't want to deal with that. Sure there is money in it, but there is money elsewhere without dealing with being a collector or paying someone to collect.

Also, there is an artistic side to restoration, not to mention saving a home. It is good for the community to fix up a neglected home and provides someone with a nice home. I did mostly higher end stuff that I took pride in. Some flippers are not doing things very well and gives the industry a bad name.
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Old 02-22-2021, 08:40 AM
 
11 posts, read 10,129 times
Reputation: 44
Default Depends on the market

I was a landlord many years ago in Kansas. Real estate in those days barely appreciated at all. I owned two rental houses.

One tenant was a dream and I broke even. Another tenant was a nightmare and I lost money. I'd renovated both houses and the second tenant destroyed the house I'd spent a year renovating.

House flipping, or renting and then cashing out later, only makes sense in a rapidly appreciating market. Right now, housing prices just keep going up and up, but it feels like a bubble inflated by near-zero interest rates and a historically low housing inventory.

I'd say if you're in a rapidly appreciating market, and have the skills to be your own general contractor, flip a house if you can get it turned around in six months or less. Any timeframe longer than that, and you risk the market changing.

And house flippers: please stop painting everything gray. I know Chip and Joanna Gaines told you to do that. They were wrong. Gray is for battleships and prison cells.
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Old 02-22-2021, 08:46 AM
 
8,137 posts, read 5,155,638 times
Reputation: 5906
Quote:
Originally Posted by Kansaswanderer View Post
I was a landlord many years ago in Kansas. Real estate in those days barely appreciated at all. I owned two rental houses.

One tenant was a dream and I broke even. Another tenant was a nightmare and I lost money. I'd renovated both houses and the second tenant destroyed the house I'd spent a year renovating.

House flipping, or renting and then cashing out later, only makes sense in a rapidly appreciating market. Right now, housing prices just keep going up and up, but it feels like a bubble inflated by near-zero interest rates and a historically low housing inventory.

I'd say if you're in a rapidly appreciating market, and have the skills to be your own general contractor, flip a house if you can get it turned around in six months or less. Any timeframe longer than that, and you risk the market changing.

And house flippers: please stop painting everything gray. I know Chip and Joanna Gaines told you to do that. They were wrong. Gray is for battleships and prison cells.
I am so over gray everywhere
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Old 02-22-2021, 08:53 AM
 
Location: Chicago area
17,660 posts, read 9,715,723 times
Reputation: 61275
Quote:
Originally Posted by tommy64 View Post
Sounds like it worked out well.
It sure did. We had to sell another rental in 2018 and those tenants were there for 8 years and didn't want to move. Just like the tenants in the 18 year rental, they were never late on their rent but they took good care of the house. They also let us paint it while they were still living there. It closed a month after they moved out. That flip was much easier then this one. Trying to find a plumber is proving difficult. Getting supplies is at times difficult because of the pandemic.

That property was a great rental since the early 90's. Most tenants stay around 2 years on average and that gives you time to do little upgrades before the next tenants move in, so that flip wasn't as hard, well except for having to suspend some of my occupational therapy for a broken arm and shattered wrist. The plan was to sell that rental in 2018 and the one we're working on now in 2019, but the tenant was in the hospital on a ventilator. I couldn't ask them to move. It floored us when he called and said that they bought something and were moving out last summer. During a pandemic and me 6 weeks post op.
This is the downside of being a landlord. But if you're flipping or if you're going to rent again, you have to have a good amount of cash in reserve for these down times.

Renting first long term has its advantages. Especially if you buy right. Both houses not only paid for themselves, but both will have a profit on resale. The 8 year rental was huge and put us in a different tax bracket. This one will be maybe $15,000 in profit, but, it made a ton of money over those 18 years.

It needed to sell in 2019 to be sure the profit didn't effect my medicare premiums next year, so that remains to be seen.

If I stumble on the right property, I might rehab to flip again. It sure has been fun having something to do during this pandemic. Life is still boring enough without having some kind of distraction. I don't think being a landlord is wise right now. Having had multiple properties for decades, I'm looking forward to just having our beautiful, fully restored 1911 money pit to take care of.
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Old 02-22-2021, 01:16 PM
 
Location: Raleigh
11,234 posts, read 8,623,253 times
Reputation: 15887
Quote:
Originally Posted by tommy64 View Post
There's no question that being a LL is a PITA. It can be a lot of work and headache.

I guess the real question would be does a slow, steady, tax efficient flow of cash, accompanied by an increase in asset value, over a long period of time; beat a quick, inefficient, tax burdened cash-grab?

Even if someone does make a killing on a flip, what would you do to store the money investment wise?

Quick hits of cash come and go, but a cash cow is forever.
Seems like a lot of it would depend on the property, no? Some places seem better suited for ROI as rentals than others. Anecdotally, looking at local for-rent ads, it seems like the majority of the rent comes from square footage/bedrooms. Yards, garages etc don't add tons of money to the rent, and but they do bring money at sale.
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Old 02-22-2021, 01:51 PM
 
Location: OC
9,256 posts, read 5,385,017 times
Reputation: 7417
I used to want to own a bunch of places and rent them out. Now? Good luck collecting rent from some of these low lifes.
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Old 02-22-2021, 02:50 PM
 
Location: Somewhere in America
13,750 posts, read 12,691,459 times
Reputation: 23852
Quote:
Originally Posted by tommy64 View Post
Why would someone buy a house to fix up and sell for a quick buck when they could keep it as a rental and take a slower but steady income, plus any equity capture as any loan principal pays down and values notch up?

The acquisition costs, fix-up costs, closing costs, capital gains tax and risk if anything falls through looks like a short-sighted way to make (in many cases) no more than a General Contractor.

Real wealth is built over time as assets appreciate in value. Rents almost always increase. Real estate is easy to borrow against because of the self-collateralization. How much better does it get? Why would anyone let something so valuable go for a quick hit of cash?

Any thoughts from the flipper crowd?

Ever been a landlord? Have you seen the damage some renters cause? Ever try to evict someone? In some states it takes a minimum of 6 months to evict someone. Meanwhile they haven't paid a dime that entire time and are destroying the place.

While rent may increase the cost of insurance and property taxes also increase. You also have to budget for months you don't have a tenant and normal repairs.

Additionally what's a hot market today maybe the exact opposite in a few years.
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Old 02-22-2021, 02:51 PM
 
Location: Somewhere in America
13,750 posts, read 12,691,459 times
Reputation: 23852
Quote:
Originally Posted by tommy64 View Post
There are a lot of expenses behind these deals. Hard money is short term @ around 10%, short-term capital gains can be as high as 37%, listing agents take a cut etc. Plus labor/materials have skyrocketed since the Covid.

It's hard to know what it costs to get a flip done and closed, but it seems inefficient and risky. What would these properties be worth in 5-10 years with steady cashflow throughout? Not to mention a fix-up to rent is less cost than trying to hit the top of the market with expensive finishes/upgrades. Plus a property that is kept longer can be tax deferred via 1031.
You're forgetting these people do this as a business. It's not a tax write off like it is for you. Many also are licensed real estate agents so they aren't paying full commissions.
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Old 02-22-2021, 02:57 PM
 
Location: Somewhere in America
13,750 posts, read 12,691,459 times
Reputation: 23852
Quote:
Originally Posted by Kansaswanderer View Post
I was a landlord many years ago in Kansas. Real estate in those days barely appreciated at all. I owned two rental houses.

One tenant was a dream and I broke even. Another tenant was a nightmare and I lost money. I'd renovated both houses and the second tenant destroyed the house I'd spent a year renovating.

House flipping, or renting and then cashing out later, only makes sense in a rapidly appreciating market. Right now, housing prices just keep going up and up, but it feels like a bubble inflated by near-zero interest rates and a historically low housing inventory.

I'd say if you're in a rapidly appreciating market, and have the skills to be your own general contractor, flip a house if you can get it turned around in six months or less. Any timeframe longer than that, and you risk the market changing.

And house flippers: please stop painting everything gray. I know Chip and Joanna Gaines told you to do that. They were wrong. Gray is for battleships and prison cells.
The grey everywhere is freaking depressing!
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