There were a few years where you couldn’t flip through the channels without seeing at least one show that focused on investment properties. Many of these shows were based on flipping houses for a profit, but there have been shows on renting properties as well. Is this still a viable option? Has the economy erased the earning potential of investment properties? More importantly, should you purchase an investment property?
Flipping a House
It seems like a no-brainer, right? You purchase a run down house, put some money and work into it and sell it for a profit. Unfortunately, it’s not as easy as it once was. The housing market is worse than it’s been in several decades, which means a house can set for years before it sells. This means you cannot flip a house and hope to sell it before the first mortgage payment is due. It’s simply not possible in today’s economy. However, what you can do is fix the house and rent it until the housing market improves.
Renting Out Investment Properties
In today’s bad economy, people are rushing to sell their homes so that they can rent. While it may seem crazy, it’s actually a very logical solution. Not only is the person free from mortgage payments, but they also don’t have to worry about maintenance. This is one reason why you should consider an investment property. With the amount of people out there looking for a rental home, it only makes sense to cash in on this need. However, there are some things you should consider.
Rental Properties Require Upkeep
You will be expected to fix any problems that occur. You should also understand that not renting to the proper people can cost you a pretty penny in repairs. Last, but not least, you should definitely consider the cost of the investment compared to what you can rent the place for. You want to be able to at least rent the property for the amount you’re paying on mortgage and any debt you accumulated while updating the place. Because you won’t see a profit for many years, you’ll also be happy to know that there are several tax breaks you can also take advantage of.
While flipping a house for immediate profit may be out of the question in a poor economy, that doesn’t mean an investment property is a bad idea. Purchasing a property that needs work, in a buyer’s market, will not only get you a great price, but is almost a guaranteed success. The key is to fix the property and then rent it out until the economy changes. You just need to remember to not get in over your head and to make sure you’ll be able to rent the property for what is owed each month to the bank and credit card companies.
About the Author: Zelda Shellhorn is a writer with a focus on real estate and finance. When she’s not writing home buying guides she can be found writing about MoneyMutual loans, investments, and credit repair.