Do you really want to be someone’s landlord?

Going back to the infomercials of the 1980s, the “house flipping” strategy has always been floated as a way to make easy money, and depending on the real estate market, that does work for some people. The immediate flip where you buy a fixer-upper, do the remodeling that is necessary to increase the value of the property, and then sell it at a profit is perfectly acceptable on every level from my perspective. It is just a good example of the the American ethos of ingenuity, a little capital, and some elbow grease being combined to make a profit. If you can do this successfully for a first time, your working capital grows, you become more experienced at it, and it is logical to think that you can continue to rehabilitate the right houses in the right locations and build some wealth.

There is a dark side to this strategy as well, and that is when an individual buys distressed property that is in some degree of disrepair and does the minimal amount of remodeling that is possible and then rents it. This can be done ethically, but many times people who go this route become pseudo slumlords who do not keep up the property, and this impacts the value of the homes in the neighborhood. If the hustlers identify a particular area as ripe for the picking, that neighborhood can be transformed into a transient nest of rentals in a matter of a couple of years. It’s not good for the homeowners in the area, and its really not good for the tenants who invariably have a hard time getting anything repaired, and the landlords inevitably raise the rent annually and the place winds up being occupied by different people each year.

There is honest profit to be made through buying some property, improving it, and selling it for more than you paid. But leaning on a bunch of rentals to make a buck is a questionable strategy at best.