Visualize a retirement in a paradise area of your choice or, more realistically, even more than one seasonally. Think of having a constant cash flow that eclipses any reasonable risk-adjusted investment returns from stocks, bonds, or savings accounts. Rental-property investing is the way to build and grow a portfolio over time that will fund the lifestyle, retirement, and future healthcare needs you may require.
While TV shows you see about flipping houses for fast profits can be fun to watch, consider who is buying many of these flipped properties. Sure, some are sold immediately on the open market to homebuyers, and some listed with real estate agents. However, the costs to the flipper can increase tremendously due to commissions, marketing, and a longer holding time, depending on your market.
Smart Flipping
Many more house flippers are selling to real estate investors. The smart flippers know that an investor can be one of their most prized customers, so they select homes with that customer in mind. Smart flippers will also study the local rental market trends, tenant demographics, and cash flows that an investor will accept. The house-flipping strategy these flippers implement is to buy at a discount, rehab the home affordably, and sell to a rental real estate investor with an analysis of what the home will rent for and the expected cash flow. It’s smart, and it works.
The best part is, you can become that buyer! Of course, you’ll need to have the funds ready and available to buy the homes for cash or with some leverage, but the good news is, you can arrange funding in a number of ways. Some rental investors take on partners, while others use their current assets as backing for lines of credit to purchase rental homes. If you’re currently flipping houses, then consider putting away a percentage of your profits into a rental bucket to use as a down payment for financing. How do you win with this strategy? As your tenant pays your mortgage for you, your equity in your rental property increases and you may even see the benefit of appreciation over the long term. Eventually, you can use the equity in the rentals you own to fund purchases of other income-producing property.
Working with your House Flippers
The biggest advantage of cultivating relationships with experienced house flippers is they will become familiar with your acquisition requirements for investment. They can, over time, become an extension of your strategy, shopping specifically for homes and opportunities that meet your requirements. Ideally, you’ll tell them exactly what you’re willing to spend for a home in a given area, and exactly what you want for your monthly cash flow and they’ll go out and find it.
You can even be proactive in offering suggestions and adjustments within the renovation budget that will meet your investment needs and the profit needs of the house flipper. If you’re well-funded, you may even be able to offer funding for the rehab for reduced pricing or a generous short-term return before you acquire the home and convert it to a long-term rental property.
Create a Flow of Opportunities
The goal here is to build relationships with multiple house flippers. Why? This creates a flow of opportunities and properties for your consideration. The more you can have presented to you on an ongoing basis, the better able you will be to hand-select the best deals. As a long-term strategy, you should be able to place orders for properties that will meet your rental property needs, specifying a price range, local market, number of bedrooms and bathrooms, etc. This helps the house flippers narrow their focus even more, search deals and determine their budgets for renovation with appropriate timelines to deliver exactly what you need.
How do I know this works? Because I implement this strategy in the southeast USA all the time for single-family and multifamily apartment complex opportunities. Why not let others take the short-term risk and become your suppliers? You reach your goal to build your portfolio and fund a lifestyle you’ve always wanted.
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