Flipping Versus Income Producing Real Estate Investing

By
Real Estate Agent with RE/MAX Dallas Suburbs TX Broker 0513551

Modern Home for Rent

I did an interview with Bonnie Petrie on KRLD Radio last week. It was an interesting conversation. She wanted to talk about the shift away from flipping homes to buying homes to use as income producing investments. We’ve been talking about this shift for the past several years yet the emphasis has remained on flipping houses.

Why the shift? The primary reason is the lack of “easy” money that once fueled the flipping engine. Investors were able to purchase properties, rehab them, and then get them back on the market. Buyers were able to take advantage of the “easy” money, securing a mortgage and becoming homeowners.

The lending market softened with mortgage meltdown. Underwriting guidelines tightened on both borrowers and the properties. This left fewer buyers able to purchase and lenders began asking lots of questions about why a property that sold for $100k two months ago is now worth $150k.

The conditions that have made flipping properties much harder are what make investing in income-producing properties the thing to do now.

Investors can purchase properties at a discount, rehab them, and then lease them to produce a steady stream of income. I find investors with cash have a much easier time of it but money is available. Investors need to be prepared to put 20 to 30 percent down and carry the costs of rehabbing the property.

Investors need to carefully select properties. Not only is initial price important, but the cost of rehabbing the property has a huge impact on the long-term capitalization rate. This is where working with a seasoned real estate professional and having a solid pool of trusted contractors is critical.

Property management has lots of pitfalls, so investors need to outsource the management of their properties or become very familiar with state and local laws.

Looking to invest in real estate in the Dallas area? Contact us!

Lease and Rental Homes in the DFW Metroplex

Tom Branch, Broker, CDPE, SFR
Source: http://www.thebranchteam.com/wordpress/2011/05/31/flipping-versus-income-producing-real-estate-investing/

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Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton.  While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure.  Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.

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Liz and Bill Spear
RE/MAX Elite 513.520.5305 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Tom, Nice information for that niche!  Plenty of prime buying opportunities for those wanting to create rental properties.

May 31, 2011 04:03 AM #1
Rainmaker
90,505
Goran Utvic
606 Homes LLC | Chicagoland Brokers Inc, Chicago IL 60656 - Chicago, IL
We Buy & Sell Chicago Houses Fast

Tom - great post...rent rates are going up and investors are taking advantage of low prices and buying up income properties.

May 31, 2011 04:44 AM #2
Rainer
46,587
Nathan M
Rentec Direct Property Management Software - Grants Pass, OR
President (Rentec Direct)

Some markets even more than others, I understand areas like Vegas which were so hard hit are an investors paradise right now. Other locations still look sweeter today for investors than they have in 20 years.  It's a good time to be an investor as long as you have the cash for the new bank requirements.

May 31, 2011 08:50 AM #3
Rainmaker
421,309
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Tom, 

I think this is very true.  The ability to "flip" today is severely hampered, however, the option to offer the investment home as a longer term inventment rental with a STONG leasing demand is a very good option. 

Purchase price is low, interest is low and lease/rental prices are high.  For investment real estate it doens't get much better than this. 

All the best, Michelle

Jun 01, 2011 02:45 PM #4
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