Flipping and holding are two very hot topics of real estate investments and likely always will be. We are going to tackle each of these in the weeks to come and try to give a little insight into the concept and pro’s and con’s to each.
Let’s start with HOLDING, one of the options nearest to my heart…apartments. Having been raised in a family that specialized in hotels and apartments, my passion runs a little deeper than the sheer financial opportunities it presents. In addition, spending nearly 10 years as Publisher of the Apartment Guide, allowed me to thrive and learn from some of the best and smartest investors Kentuckiana has to offer.
A HOLD is a great strategy if you are looking to build future wealth, or at least, it can be. The general concept is, the tenants pay down the mortgage, you receive little month income now, to have a property, that will be paid and generating excellent residual income in the future. Now in between these two a few things MUST be done correctly. I have seen many smart and wealthy people absolutely HEMORRHAGE money due to lack of experience and mis-management.
So let’s delve into that a little bit. We often hear the term slumlord, referring to an owners inability to operate an apartment correctly. The owner sucks money out and doesn’t keep the unit in the expected condition. THIS IS DUMB. Let’s think about it. One of the biggest cost that will occur on your Pro Forma, is turnover, fixing a unit back into good shape and getting ready for the next tenant. With that being said, wouldn’t it behoove an owner to do what it takes to keep the tenant happy (not to mention it’s the right thing to do.) Another pitfall I often see is an owner getting cheap on repairs, or trying to find the “cheapest contractor”. You get what you pay for. You go cheap, it will be done wrong, the issue will likely cause further damage to the unit (accruing larger costs) and you will have an unhappy tenant, who is likely already on www.bassgroupre.com looking for a new place to live. OR, you can pay a little more upfront, getting the job done right, knowing you won’t be called for the same issue next month. The tenant is happy and amazed the issue was resolved right and quickly.
One of the most important people in your journey to successfully rentals is your maintenance man. He will either save you significant money or allow you to lose plenty of it. Not only are they your eyes and ears on each unit, but they fix the problems and keep the tenants happy. I cannot stress this enough, do NOT go with the cheapest contractor.
Apartments can be scary but they really aren’t. The first part is understanding the basics and nailing the execution. Obtaining them is the first step. What location, what rents are they pulling, is there upside on the location? Many things to consider! This is part of the fun of it, each property is it’s own puzzle. There are many ways to obtain properties and using a bank is my least favorite 🙂 Sorry lenders you just ask too many questions, I understand why, but investors just don’t like it. I am not saying banks are bad, I am just saying I’d make it your last resort option.
I hope these teasers, gave you a bit to think about. Rentals, never seem to go out of style or need. Enjoy the read and start to consider if this type of investment is right for you.