Flipping Houses or Renting Houses?
Everything you read or see on those reality shows is about buying properties to fix up and resell. Very seldom do you hear about buying a property and holding it as a long-term rental property?
When mulling over these two options it really boils down to this:
Do you want to be a fixer-upper and every day you are doing, doing, or would you prefer to eventually sit back and receive income for the rest of your life?
A fixer-upper fixes up a place and if all goes well, make a profit. Once the transaction is complete and they have collected a cheque at the closing, they are done and go back and repeat the same thing over again, or, try to. There is no additional income or profit available. In order to make any more money, you have got to and fix up another place.
Work & take a risk… get a cheque. Work & take a risk… get a cheque. Work & take a risk… get a cheque.
No work… no cheque
Flipping houses is a job and you don’t get paid unless you work.
Even worse, the profit on a flip is fixed based upon the final sale price of the home. No matter what you do, you won’t be able to make any additional profit on the deal. Sadly, this profit can disappear very quickly if you encounter unforeseen problems in your renovation.
Who really wants another job?
The investor who focuses on investing for the long-term in rental properties enjoys annual income for life. They work to buy a property and get it rented to a quality tenant and then they sit back and collect rent cheques each month. This is the same as a writer who works to write a book and then sits back and collects royalties from their book sales or a songwriter or movie actress, do it once and keep getting paid!
Work & take a risk… get a cheque once. Work once & take a risk… keep getting cheques!
When the writer wants more cheques, he or she simply writes another book. They work again for a few months and then start collecting two cheques each month going forward. These cheques tend to compound on top of each other. The reason why is because every time they work they get paid multiple times from their effort. They’re still getting paid from their first book as they write and complete their second book.
Even better, the profit on a long-term rental is unlimited as you collect more and more income with each passing year. One rental home that pays you $5,000 a year can ultimately generate $100,000 of income in 20 years, $200,000 of income in 40 years. And here is the best part; your tenants are paying down your mortgage!
You can even leave your rental property to your children and they’ll collect cheques each month throughout their lives.
You can’t compound home flips because you’re not still getting paid from your first flip when you’re working on your second flip.
This means investors who flip homes really aren’t investors. Instead, they become employees and have to continue working to get paid.
Flipping is a j-o-b and your boss will want you to work evenings and weekends for months!
Note: I didn’t write the above and I can’t remember who did but I have been letting my clients know about this for years and those who apply this long-term strategy are doing extremely well!