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One of the most common statements I get from newer investors is, “I don’t know where to start.” They know they want to do real estate, but they are not sure what. The idea of being a “Land Barron” and owning and controlling land is appealing to all of us. There is a reason that the game “Monopoly” is one of our all-time favorites: we all love to own real estate.
Then, some want to flip houses. Make the “quick and easy money” that they see people on TV making. Well, first, there is no easy and quick money to be made. Secondly, it’s not as glamorous as they show on TV, and what TV does not show you is the headache, pitfalls, and aggravation of finding the house to flip and then actually going through the process.
There is a strategy that has been around for years that combines the two. A lot of people do it; most people know what it is but are not sure what to call it. The industry never gave it a name for a long time. Several years ago, I started calling it “Buy-Fix-Up-Rent.” I didn’t make the strategy; it was shown to me; however, I did give it a name so I could talk about it, and I’ll explain what it is below.
Buy–Fix-Up–Rent is a good way to build long-term wealth and add quality assets to your portfolio and balance sheets. With the deals on the market today in this economy, I’m seeing some good opportunities to turn properties into 15-20% cap rates on rentals based on purchase price plus renovations in regards to what can be achieved in the rental market.
You can also add some monthly cash flow to your books as well as take advantage of some great tax write-offs. (NOTE: Please consult your tax professional before making this decision. Do not base your tax decision solely on the content of this post).
This strategy takes cash to acquire and renovate a property. You will not recoup your investments quickly enough solely by renting to be able to purchase more. Another drawback might be related to the management aspect if you do not want to be a landlord, then holding rental properties could be a nightmare full of headaches for you unless, of course, you utilize a third-party property management company, like C.A.P. Real Estate.
CAP Real Estate offers comprehensive property management and back-office support solutions that will fit your needs and help you on your real estate investment journey. Message us using the form below to talk about your real estate investment needs.
It is a popular belief that rehabbing a house is easy. Just go in, throw down some carpet, paint a few walls, and you’re finished, right? WRONG! One of the most expensive endeavors a landlord faces is the turning of a vacant property for the next tenant.
There are so many variables to consider, i.e., paint, flooring, trash removal, and much more. Some will be regular occurrences, while others can be minimized and possibly eliminated. Now, keep in mind if you get a tenant who is just outright destructive to your property, then turning your vacancy will take longer and involve much more than the norm. But if you did a proper job of screening, then your tenants are more likely to act responsibly.
There are invariably hidden items that will impact the timeline to complete the renovations. This is expected up to a certain point, so be sure to budget for overruns and cost averages.