Is It Better to Be a Landlord or a Property Flipper?
Real Estate is a very exciting proposition right now for those looking to rebrand themselves. That is a diplomatic way of referring to those who find themselves unemployed due to the pandemic. It took a lot of people who were job and income secure and turned them into unemployed and desperate overnight. To say it happened overnight is once again putting a nice spin on it. In truth, it happened in slow motion for over a year. And people are still trying to figure out how they are going to move forward.
Fortunately, there is a relatively safe and easy on ramp to another career. It doesn’t matter that you have no previous experience doing it. You are also fortunate that this career requires no large sum of money to get started. You can learn on the job and make money as you go. This has given a lot of people a new outlook on life. You might have already decided between commercial and residential. You have chosen residential because of the ease of entry and relatively quick turnaround. Now, you have to decide whether you want to be a landlord or a flipper. Here are some considerations that should inform your decision:
Wholesaling Is Faster
The choice might not be as binary as you first thought. You can make money without being a landlord and also without outright buying, restoring, and reselling a property. The third way is to take assignment of the contract and reassign it for a profit. That is called wholesaling. In the article Is Wholesaling Real Estate Legal, you will find answers to the most common questions people have when considering this option, including full disclosure of the legality. This is just one part of your real estate education.
If you want to be a landlord, you first have to purchase the property and then restore it. That can cost you a lot of money and also a lot of time. If you flip the house, you still have to purchase it. You don’t necessarily have to restore it to be move-in ready. But you will have better success if you do. Again, you are left with the problem of money and time: neither of which you have at the beginning. Wholesaling is a quicker path forward with fewer bumps in the road.
Being a Landlord Carries Risk
COVID eviction bans are still in court. It. Is hard to tell which way things will go. For a long time, many landlords have not been able to collect rent. And they have not been able to evict tenants. For some, this will lead to financial ruin. The courts have to weigh whether the good of the many outweigh the rights of the few. Where are the Vulcans when we need them? This has been a rather disastrous time for landlords and renters alike.
Even when there is not a pandemic, it is surprisingly hard to evict someone from your property. You will be appalled at the cost and frequency of needed repairs. Not all of your tenants will be particularly upstanding citizens. You will have to deal with all these risks. If you rent a house to a bad renter, you could end up paying almost as much to restore the house for the next renter as you did to purchase it. Those types of renters will quickly drain you of your profits. As a landlord, those risks are always there.
The Problem with Flipping
Many gymnasts do amazing work only to fail to stick the landing. This is often what happens when flipping. You can put in the work to restore it to perfection, only to find there are no buyers willing to pay any price that would leave you with a profit. You need to know how to invest in real estate while managing the risks. There are risks at every level. But a lot of people run into some of the bigger risks much faster when doing rental property and house flipping. Consider wholesaling for reduced risks.
Should you buy rentals or do flipping? You can make money either way if you are careful and wise. Just remember that wholesaling is a faster round to profitability. And renting and flipping come with major risks. But if you are careful, patient, and willing to make a few mistakes, you can make either option work for you.