Should You Buy Long-Term Rentals?

flip hacking May 06, 2022

You may be thinking, “Chris, you talk a lot about flipping real estate on this blog, but what about long-term rentals? Isn’t it even more important to create long-term income, rather than just a quick profit that you have to generate again?

This is a great question.

When most people talk about real estate investing, they think in terms of long-term rentals. And you haven’t heard me mention it much here.

There’s a reason for that.

I’m going to share my personal opinion. Clearly not everyone will agree with me, but you’re reading this blog because you want my perspective. So, I’ll give it to you.

In most cases, I think you should only buy long-term rentals if you can pay cash.

And since most people can’t pay cash, I focus in this blog on income producing forms of real estate that don’t require you going into debt.

Now, having said that, I think rental properties are great. My wife and I own rental properties. I just happen to agree with Dave Ramsey. If you want to invest in long-term, buy & hold rental properties, do so with cash.

Use your W2 income or your flipping business income to generate the cash you need to pay cash for rental properties. I think that’s a great strategy!

And one of the best things about owning a flipping business is that you can cherry-pick rental properties from your own pipeline of deals. You can pay cash for those deals & immediately know you have equity because you bought the property at a discount.

So, should you buy long-term rentals? Absolutely, if you can pay cash. If you can’t pay cash yet, build a flipping business that can generate the cash you need to buy rental properties. I have friends that run their flipping business primarily to generate cash to buy more rental properties.

A hack to get a long-term rental before you have cash is to buy a primary residence with a detached structure that you can renovate into a long-term rental. We call that House Hacking!

One final note.

When you’re looking for an asset class to invest your cash, consider how passive you want the asset class to be. If you’re willing to put some work in, rental properties can be great. But if you want something extremely passive, index fund investing is probably your best bet. Rental properties require management & attention, but when you invest in index funds, you’ll never get a phone call.

Long-term rentals bought with cash is a great way to supplement & eventually replace your income!


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