Even though I’ve had the opportunity to flip the homes I’ve bought, and even though I’ve represented my own clients who’ve flipped real estate for massive profits, this is why I’ve preferred NOT to flip properties and instead, keep them as rentals. Add me on Snap/Insta: GPStephan
To me, my priority and focus has been to build up my passive income as much as possible, year after year- so far, in the 6 years that I’ve been investing, my income from my rental properties covers pretty much all of my expenses, allowing me to save 100% of what I make from working as a realtor.
This is the type of investing I prefer – partly due to laziness in that I can continue to increase my passive income and grow that up to be able to retire whenever and have total freedom to do what I want, when I want, and partly because it’s less time intensive than flipping properties. I take a very lazy, easy approach to real estate investing. It’s slow and steady wins the race attitude. Once you set up a rental property with the right tenants, it can pretty much run on its own, making you money while you sleep.
Disclosure: People can make a lot of money flipping. This isn’t to say that it’s not very, very lucrative – I know and have represented people that have made hundreds of thousands per deal. It can be a great business to be in and there’s absolutely nothing wrong with it. Everyone’s goals are different and many people prefer the immediate profit of a flip – But here are my own personal reasons why I prefer to keep my properties as rentals.
1. It’s a lot of work to flip a property, especially in a competitive market. Inventory is low and finding a deal worth flipping could take months. While it can generate a lot of profit immediately, it requires your constant work to keep the momentum to continue flipping.
2. When you sell it, you pay taxes as ordinary income – not long term capital gains, which is taxed much less.
3. Market timing. Finding a good deal could take months in Los Angeles…add another 2-3 months of renovation, and another 30-60 days of having the house on the market before closing, and you’re looking at 5-9 months from start to finish per deal.
4. Profit. Given the amount of work and time I’d dedicate to flip a property, it doesn’t make sense for me when it takes my time away from my main focus, which is working as a Realtor.
5. If the property has that much equity in it that you can flip it for a profit, chances are you can charge much higher rents than before, improving your cash flow.
For me, I’ll take passive rents without doing much – it just requires some upfront work and an initial upfront investment, but once you get it going, it can run for a very long time. Having this type of passive income really allows you the freedom to do what you want, when you want – and focus on what really brings you the most joy. For this reason, I prefer rental properties over flipping.
For business inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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