In a hot rental market, it can be easy to buy a property that is increasing in value rather than a property that can generate positive cash flow. The temptation to simply flip a property for a lump payment in the future or near future can be too tempting for some. However, this strategy has some pretty nasty downsides. Let's dive into the differences between appreciation investing and cash flow investing.
When people get into the rental housing industry and buy their first income property, they often buy a distressed house and fix it up, even if it is a personal home that they are turning into a rental. However, this solution can be expensive if the new housing provider can't do much work on their own. A more expensive, albeit easier, option is to buy a rental property that has been fixed up. The so-called "turnkey" rental property is an attractive option for investors who like a more hands-off approach to their rental property and don't want to put in time to fix up the property and make improvements. On the surface, this can seem like an ideal solution for an investor who is ready to jump into the industry.
The rental housing industry can be very profitable and a pathway to greater wealth. However, this industry is not for everyone. Many people get into the rental business and think it’s as easy as signing a lease, handing over the keys, and then sitting back and collecting the rent.
It’s always exciting to be able to invest in the next big neighborhood. Gentrification around city centers usually goes in a pattern that starts with artists and others who need cheap housing that no one else wants. Then their friends and others interested in vibrant culture start to move into the area, particularly if there are older houses that surround the area. Then recent college grads with entry level jobs move into the area. Soon, those recent college grads become professionals bringing in more professionals into the area, particularly if there are single family houses for sale. Now the neighborhood has fairly well gone mainstream. While this process is well understood, another factor that many metropolitan areas, like Seattle, have within their expanding cities is the LGBTAQ+ community.
Cameron Cowan | Knowledge Steward
There are some really great and interesting ways to build your real estate portfolio and in this blog post we're going to talk about two of them. These aren't always easy but it can help people at different economic levels enter the real estate market and start building wealth. Both of these options are really popular for younger people, including our younger members. They make getting into rental housing more affordable and they both provide the foundation for a great rental housing business.