Real Estate Investing
They sure do make flipping houses seem so easy on TV! Learn the pros and cons of fixing up a home to flip for profit or to hold on to and rent until you are ready to sell. Investing in real estate can be profitable, but it is essential to decide which type of investor you want to be.
Real estate is a tangible asset that has advantages the stock market does not and has outperformed the stock market since 2000. Real estate has man long-term financial advantages.
Fixing-and-Flipping vs. Fixing-and-Holding Properties
Fixing-and-flipping a home can yield a substantial profit for investors. When investors find a home at a discounted price, renovate structurally and cosmetically themselves, and sell quickly to a qualified buyer, their profits will be higher.
Pros and Cons of Fixing-and-Flipping a Property
Pros:
A quick profit – Investors can make a year’s salary in a few months by repairing a discounted home structurally and cosmetically.
Networking – Flipping houses allows investors to build connections with real estate agents, contractors, inspectors, and insurance agents to make future real estate investments are more accessible and more profitable. Networking offers many advantages to investors; such as new home listings, design ideas, and discounts on materials and labor.
Flexibility – House flipping allows investors to keep their capital and profits fluid, allowing them to invest in other opportunities quickly.
Cons:
Complications – A renovated house may have unforeseen and complicated issues costing more than what was anticipated to repair and may not sell immediately, leaving the financial burden on the investor.
Taxes – Profits may appear big until your home is subject to capital gains tax, a tax which will reflect previously taken depreciation tax deductions.
Resale – There is no guarantee you will find an instant buyer, so investors need to prepare for this potential issue by having money set aside to cover the overhead until the property is sold.
Pros and Cons of Fixing-and-Holding a Property
Fixing-and-holding can grow an investor’s profit margin. Renting out a property can generate monthly income while waiting for the right time to sell the property.
Pros:
Income – Renting out a property for a payment exceeding your expenses while you wait to sell earns you an income while doing nothing more than being a good landlord. Collecting rent will also help pay your mortgage down, and when you do decide to sell your profit will be increased.
Taxes – Real estate investors benefit from many types of tax deductions; such as property taxes, mortgage insurance, and mortgage interest.
Appreciation – Buying and holding a property typically means the value will increase over time. As the cost of living increase, the rent can increase. Meanwhile, the mortgage payment remains the same, although property taxes generally move upward.
Cons:
Tenants – The right tenants can be a dream and the wong tenants can be a hassle costing the investor substantial sums of money. When tenants do not pay their rent on time, the landlord must still bear the cost of ownership.
Property Damage – Even tenants who pay on time each month may leave you with other investors will have to cover the costs. If the tenant is difficult or needy, it can cost the investor their money and their time.
Vacancies – A property vacant for months can leave the investor with a mortgage, utilities, and maintenance costs.
Florida National Title
Whether you are buying a property to fix and flip or fix and hold, you need an experienced title company to ensure the title of the property is clear from all defects. Florida National Title can help search any titles on any property you wish to purchase.
Expert Title Services Jupiter
Florida National Title has years of experience guiding Florida homebuyers through the real estate purchase and refinance experience and have helped them solve the problems that come up in the process. We will decipher the “legalese” and explain what we need and why we need it each step of the way. The blogs to follow will address specific issues to guide buyers to understand the process better and to help them avoid many of the pitfalls. Call us at (561) 408-0729 or visit our website.
Florida National Title Services, LLC
250 S. Central Blvd., Suite 101
Jupiter, Florida 33458
(561) 408-0729
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