Lease or Leave: Deciding What to Do With Your Fixer-Upper

Fix & Flip
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11 Jan 2022
5 min read
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At the end of a renovation project, house flippers must decide whether to sell their property for a profit or to rent it out to tenants. Weighing the benefits and drawbacks of both strategies will point you toward the income model that's right for you.

Selling Your Property

Putting your house on the market is the easiest plan with the least commitment. Having your home reassessed and selling it at a profit provides you with a lump sum after paying off your mortgage. Once the papers are signed and you've received your payment, you never need to think about the property again. The only drawback is that this one-time payment will most likely be less profitable than renting the home out.

Renting Out Your Property

Rental properties are a longer commitment with more obligations, but they also stand to be far more profitable than reselling the house outright. By charging tenants a sizable monthly fee, you can invest those funds immediately into your mortgage, property tax, maintenance fees, and a considerable profit for yourself. Having all of the house's expenses covered by someone other than the owner means you can focus your attention on commodifying shelter.

Renting out your house also brings with it a series of challenges. Tenants will expect routine repairs and upkeep, and your house is unlikely to retain its value as well as if the owner lived on site. With eviction regulations sometimes favoring tenants, it can be difficult to collect rent from a tenant in bad standing in a timely fashion. Luckily, government assistance is available for landlords who may find themselves coming up short on the house's bills, so the risk of this business model is mitigated.

Assessing Your Preparedness

Being a landlord requires an investment of considerable time and money. Landlords are usually responsible for most repairs on-site. You may find yourself in an unfavorable or even legally actionable position if you can't afford to keep things up to a certain standard.

Research what sorts of services you may need to perform or outsource for the house. For instance, if you need any windows repaired, you’ll need to bring in residential window repair services. Costs will depend on the type of window and repair. Consider every part of the house that may need routine or surprise maintenance and identify whether the property is still profitable with those repairs in mind.

If you're vacating the fixer-upper because you're moving far away, or if you don't have the time to be a hands-on owner, someone will need to be available locally if you decide to rent it out. Consider forming or contracting a property management company. Such an organization can handle bringing in new renters, handling rent payments, and organizing maintenance requests. As you make these arrangements, keep in mind that every additional person involved means less direct profit for you.

After you’ve completed renovations on your fixer-upper, you’ll need to determine whether to sell your home or rent it out. Carefully consider the ramifications on your finances and time.

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