What Should You Do With Your Remodeled Fixer-Upper?
Buying a fixer-upper to renovate is an appealing investment opportunity for some, but once the property is repaired, should you rent it out or sell it? In some areas, renting can be a reliable long-term revenue stream, while in others, it makes more sense to sell. If you’re not sure what the best move is, use this advice from the Rural KC Real Estate Team to help you decide.
Tips for Making a Property More Desirable
The trick to making money flipping homes is to find a property that's undervalued, then make small improvements to get a better price for it. Some of the simplest improvements are ones that increase a property's curb appeal.
For example, a property with a garden might look a lot better with a fresh lawn and a new fence. If you're not skilled at this kind of work yourself, you should hire a fencing contractor. Don't just hire the first contractor you find, though—read Angi fencing reviews online and get multiple quotes. The average cost of a new fence is around $4,500, but actual prices vary depending on the materials, the size of the fence, and your area. Choose a contractor who's licensed and insured, and make sure they check the area for any underground utilities before starting work.
Why Flipping Is Often More Convenient Than Renting
Flipping a property can offer a one-off profit. Many flippers follow the 70% rule. This rule dictates that the cost of a property and any repairs done to it should be no more than 70% of the value of the property after the repairs are completed.
Finding properties that are this undervalued can be difficult, but foreclosure auctions do still offer such opportunities. People who are experienced DIY enthusiasts and can make basic repairs themselves can often turn flipping into a revenue-generating side business this way.
A 30% return on investment can be appealing, but it's a one-off source of income, and once the repairs are completed, the flipper will need to find another property and do the work again to get the next payout. Unless you have enough funding to have more than one property on the go at a time, flipping can be stressful and the income stream may not be stable—especially compared to the monthly income of rental properties. There's a reason there are nearly 50 million properties being rented in the U.S.
The Responsibilities of Being a Landlord
Renting out properties can generate a steady income and could offer tax deductions, too. However, for landlords to benefit from tax deductions and property value appreciation, they have to do a lot more day-to-day work.
Many landlords find themselves having to pay property managers to handle the daily operations of their portfolios, as well as landscapers and other maintenance contractors to look after the properties. This can quickly eat into profits. Non-paying tenants can also be an issue because the process of evicting them can be long and slow in some states. Being a landlord is not easy money.
Have a Business Plan Before You Start
Property renovations should be approached like any other business. Whether you decide to rent out the renovated property or sell, it's a business decision. Run the numbers, talk to some professionals, and understand the market in your area before you start spending money.
Are you in search of an investment property or your forever home in the Kansas City area? Contact the Rural KC Real Estate team!