Buying and Selling a House Can Work Out Well
Many Nations Lending clients see advertisements (again) for house flipping. And although some view it with suspicion, the act of buying a home, renovating it, and selling it to hopeful buyers can be a winning situation for all involved.
With the housing market picking up it may be a good time to begin flipping homes or to pursue a buy-to-hold method. For those who are successful at flipping, many find homes to purchase from those who are willing to sell properties at a discounted price, whereas others attend auctions to bid on foreclosed homes.
We tell our clients that harnessing the technical rehab skills necessary to restore a home is vital, otherwise contracting out the work may become costly. It’s also important to keep in mind when purchasing distressed properties, the unforeseen problems that may arise and the costs associated with them. Hiring a credible contractor will aid in the rehab process as well as being able to sell the property as soon as possible in order to keep financing costs down.
If flipping a home seems like too much of a financial burden due to the renovation expenses, Nations Lending tells clients that buying a property and turning it into a rental home may be a smarter investment depending on the housing market. Renting out a home allows for cash flow and helps pay down the mortgage, creating equity in the home. When the home begins to appreciate in value, you will see a greater return if you decide to sell the home.
Of course, deciding whether or not it would be beneficial to flip or rent a property greatly depends on the location and how home prices are valued in the neighborhood. A buy-to-hold strategy works best where the housing market is soft and sitting on the property until home prices appreciate is a viable option. This may also be a good method if there are not enough homes for sale at a discounted price. If home prices are on the rise, flipping may be a good option, as you will most likely realize a significant gain.