Rental Demands Are High – Should You Fix and Hold?

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Rental Demands Are High – Should You Fix and Hold?

June 9, 2016

By Tarek El Moussa

If you’ve watched our show on HGTV, followed our blogs, or attended one of our Success Path Education seminars, then you know that my wife Christina and I are both pretty dedicated to flipping houses. It’s an exciting and profitable field to be in, and it’s pretty much recession-proof. After all, getting into flipping houses gave us the financial freedom we needed to stay in the real estate business even after the housing bubble burst in ’08.

However, with the economy recovering and a lot of millennials looking at housing in a different light than previous generations, you may be wondering if flipping is your best option. If you live in a city that’s home to a lot of big corporations, you’re probably going to see a lot of people moving to your area for work. Before they buy houses, most of these professionals are going to be looking for rentals, which means the rental market in your area is probably at peak demand. Seeing this, you’re probably thinking that fixing and holding properties might pay off more than flipping. Let’s take a look at a few details before you decide to become a landlord, though.

Rental Properties Don’t Manage Themselves

If you’re going to rent out a property, you need to understand that it’s going to need more attention than you think. Even if you have the world’s best tenants, they’re inevitably going to call you in the middle of the night when they find a leak in the roof or when the toilet or tub is clogged. You’ll be wondering why they were awake at that hour in the first place and why they can’t figure out how to use a plunger, but that’s part of being a landlord.

Alternatively, you could avoid the whole landlord business and hire a property management company to take care of all of those emergencies and maintenance issues. You’ll make a slightly smaller margin each month in rent, but your income will be completely passive. The only problem is finding the right property management company, one that will take care of everything you need. Just like finding a contractor you can trust, finding a property management company takes time and effort.

Vacant Properties Can Be Money Pits

If you can’t find tenants to live in your rental, you’re still going to be responsible for its upkeep, paying on any loans you have on the property, and paying property taxes. In other words, if you aren’t completely sure that you can find tenants and keep them, you need to be sure that you’ll be able to keep up with paying for the house until you can.

A Lot of Renters Are Looking for Homes to Buy

The rental market in your area may be booming, but is the market for home sales really waning or suffering? Probably not. Here’s the thing—the people moving to your area for work are likely only going to be renting for a few years (or maybe even just a few months). They’re renting now so that they can find a place to buy once they get to know the area.

While the rental markets all over the US are really in demand right now, you don’t have to jump on the fix-and-hold bandwagon if you’re not ready to hold land. In fact, if you’re not prepared for the responsibilities that come with being a landlord and what it takes to pay for vacant properties until you get tenants, you’ll probably do a lot better with the fix-and-flip market. It’s worked well for us so far, and we’re planning on sticking to it!

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Tarek El Moussa

Tarek and Christina El Moussa have over a decade of professional real estate experience and have been featured in national print publications, online media outlets, and a popular real estate TV show. Tarek is known for his determination to get the job done and doing it right.