Once you’ve bought and renovated a property, you have a choice to make. You can sell it right away and move on to the next one, or you can keep it and rent it out. Investors do well with both approaches. Which is better for you depends on your cash, your goals and how much ongoing work you want.
Here’s a closer look at each.
Selling quickly gets your money back sooner
The fastest way to see a return is to finish the work and sell. Your capital comes back, along with the profit, and you can put it straight into the next deal.
Speed takes preparation. Have your contractors and suppliers lined up before you close, so renovation starts on day one. The shorter the project, the less you pay in interest, taxes and insurance while you own the house.
There are downsides. Profit on a quick sale is generally taxed less favorably than a long-term gain, and you pay selling costs every time you flip. Whether those outweigh the work of finding tenants and maintaining a rental is something to weigh up, ideally with your accountant.
Holding can give you more ways to earn
The alternative is to keep the property. Some investors hold and wait for a better time to sell. Others buy a fixer-upper, renovate it and become landlords.
Holding gives you rental income month to month and the chance that the property gains value over time. There can also be tax advantages to owning rental property long term.
In exchange, you take on the legal responsibilities of a landlord and the ongoing job of managing the place. Your capital also stays tied up in one property, which may slow down your next purchase. If you go this route, read our tips for keeping good tenants.
Questions to help you decide
- Do you need your capital back to fund another deal?
- Would the rent comfortably cover the mortgage, taxes, insurance and repairs?
- Do you have the time to manage tenants, or the budget for a property manager?
- What does the local sales market look like right now?
You don’t have to choose one strategy for good. Many investors flip some properties and hold others.
About Sachem Lending
Sachem Lending originates, services and manages first mortgage loans for real estate investors. We bring an experienced management team, long-standing relationships, knowledge of our markets and flexibility in how we structure loans. Explore our loan programs, or call us today.
