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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.
If a local market is appreciating healthily, then flipping makes sense. If a local market is stagnant or appreciating slowly, then renting out makes sense.
Generally rental yields and appreciation are inversely related.
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.
They don't store it. They move on to the next project.
You don't seem to get that you only need the hard money loan for the first 1-2 if you don't have that cash anywhere else to get started. After that flippers use their own cash so that hard money interest rate doesn't apply, increasing their profits.
Quick hits of cash come and go, but a cash cow is forever.
Are you a LL?
Cash cow?? On a few renovated SFHs? I assume that's the scale you're talking about.
I guess it depends on a lot of things, your market, your interest in managing your own properties, time you can devote to finding/replacing tenants, how mortgaged the properties are (vs. owned free) etc.
Even without nightmare tenants...with only a few SFHs/tenants, one vacancy for a few months could be a real cashflow problem (or maybe not). It would certainly eat into your profits. And if you're not full time and handy you'll be paying for everything every house needs.
But I don't really mean to say it is always a bad idea, not at all. If I didn't already love the career I chose and the area I live in (very landlord unfriendly), I'd be ok being a full-time landlord in some markets. But I would consider it a full time job and get help accordingly.
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?
....said the guy who is good at using Excel, and probably has never actually owned a rental property ?
Back in 2010ish I bought a few easy fix-ups to rent out. I've netted at least 10% rental income per year on the all-in costs, and the value of these properties has nearly quadrupled. Some of these I did with sub 4% 30 year fixed mortgages, which is a super inflation hedge. 25% of my own money down, the bank is doing the heavy lifting for a very long time.
The equity is ridiculous on the properties now. Plenty to borrow against if I wanted to buy more stuff.
If I'd fallen into the flipping game (I've talked to 100's of LL's and flippers over the years) I'd still be flipping houses and paying huge tax bills and real estate commissions. Not to mention the stress of dealing with contractors who can be just as shady as a crappy tenant.
In a long game, longer than I think most people can comprehend, I'm way ahead of the flippers and will only continue to gain more ground.
I've talked to flippers who are all about churning cash with zero regard to costs. One guy was bragging about having over 1mi in debt, but couldn't tell me what he paid in taxes and had never heard of a 1031 exchange. As long as they're shoveling money from one pile to another they're happy. The more the better, they have few thoughts beyond that!
They remind me of a football team that can score 50 points per game, but still can't win, but who cares, look at the stats!
There is a very stark contrast between the boring buy-and-hold guys like me, and the more hyper-active flippers, that's for sure.
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.
Back in 2010ish I bought a few easy fix-ups to rent out. I've netted at least 10% rental income per year on the all-in costs, and the value of these properties has nearly quadrupled. Some of these I did with sub 4% 30 year fixed mortgages, which is a super inflation hedge. 25% of my own money down, the bank is doing the heavy lifting for a very long time.
The equity is ridiculous on the properties now. Plenty to borrow against if I wanted to buy more stuff.
If I'd fallen into the flipping game (I've talked to 100's of LL's and flippers over the years) I'd still be flipping houses and paying huge tax bills and real estate commissions. Not to mention the stress of dealing with contractors who can be just as shady as a crappy tenant.
In a long game, longer than I think most people can comprehend, I'm way ahead of the flippers and will only continue to gain more ground.
I've talked to flippers who are all about churning cash with zero regard to costs. One guy was bragging about having over 1mi in debt, but couldn't tell me what he paid in taxes and had never heard of a 1031 exchange. As long as they're shoveling money from one pile to another they're happy. The more the better, they have few thoughts beyond that!
They remind me of a football team that can score 50 points per game, but still can't win, but who cares, look at the stats!
There is a very stark contrast between the boring buy-and-hold guys like me, and the more hyper-active flippers, that's for sure.
OK you could have lead with this...or was your intention to bring it out later as a sort of humblebrag?
OK you could have lead with this...or was your intention to bring it out later as a sort of humblebrag?
post #1 is basically the same thing without my personal experience. The post you ref'd is just anecdotal detail as to why I think flippers are nuts. Of all the posts, no one got into the area of costs, which was a main point in post #1.
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