What Are You Planning to Do with Your Investment Property?
Whether you are already holding onto a secondary property or you are planning to invest in real estate, you have some options to consider. What will you be doing with that house? How will you be profiting and benefiting from that investment property?
The most important thing here is to have an investment plan. You should know what you are going to do with the property before you buy it. This will help you run better analytics and make sure you are purchasing a unit that will give you the desired return on investment (ROI). If you inherited the property or already own a second home, then you should consider your options and create a solid plan before you do anything with it as an income property.
Let’s take a look at a few investment property solutions you will want to consider:
Sell it Immediately
Some real estate investors prefer the wholesaler approach. They find properties at great prices and then flip them immediately to other investors for a small profit. This is generally a quantity game as you have to buy and sell more units to make bigger profits. However, you won’t be dealing with any renovations or extended property ownership costs, so you get your ROI quicker and simpler. A quick house sale may also be a good solution for someone who inherited a property that they don’t know what to do with or someone who is sitting on an unwanted investment property or second home. Sometimes, the simplest and fastest solution is the best one. Sell to a cash investor and move on to something else.
Rent it Out (Buy and Hold)
One of the most common real estate investment solutions is the “buy and hold” approach. This means you continue to own the property and rent it out. You could have long-term leases with good tenants or you can use it as a short-term rental. There will be some upfront costs associated with getting the unit ready for tenants and marketing the property to renters. You may opt to hire a property management company to handle the day-to-day stuff, but that will be another expense to consider. Of course, you will have ongoing ownership expenses like upkeep/repairs, property taxes and insurance. Still, it can make you good money over time if you are able to keep the unit occupied with tenants paying you rent every month.
Another consideration of the buy and hold method is that you will be gaining in property appreciation for as long as you own the house. It will go up in value, which means you can eventually keep raising rent or sell it for a higher price when it’s time to move on.
Flip It (Fix and Flip)
The next option is to flip the property. This involves fixing it up (perhaps a full renovation) and then reselling it for top dollar on the open market once it is ready. The goal here is to buy properties that need some work. Then you make the investments of time and money to do that work. The renovated property can then be sold for a much higher price and—if everything goes right—a nice profit. It is very important to come into any renovation and house flip with a plan and careful budget. It’s very easy to lose money on a flip if you aren’t properly prepared. The main benefits of house flipping are that it is a quicker way to generate a return on your investment compared to renting it out and you may be able to get a higher profit margin compared to a quick wholesale flip.
Let it Be
Maybe The Beatles were right. Some property owners are just content to sit on the house and hold it until they know what to do with it. They don’t renovate or rent it out. They don’t have an immediate plan to resell it. You will be paying some base expenses to own the property (taxes, basic upkeep, insurance, etc.), but that may be fine for you. Over time, you may develop your investment plan or simply sell it later when the market is up and you can get a good price. Unoccupied properties are magnets for unwanted occupants (human and otherwise), though, so definitely be careful about leaving it completely alone. You are probably better off selling it sooner or figuring out a way to utilize it as an income property.
These are some of the most common plans for investment property. The important thing is to have a plan and know you can turn your secondary property (or properties) into more money.
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