Quote:
Originally Posted by jIM_Ohio
I have a friend which flips and rents as a third job on the side (he is a firefighter and runs a safety business for his primary income).
When he rents, he keeps the houses 100% leveraged it at all possible- meaning interest only loans, or 20% down and 30 yr fixed payments. Tieing too much equity/value into home is too much risk.
By being leveraged he
a) keeps more cash liquid
b) puts more risk on price appreciation of property (at time of sale)
c) allows the liquid cash to buy more properties (he has 3 or 4 right now).
His current house is nearly paid off- different set of risks based on plot of land has been in his family for 30-40 years, his income might not be as high as other occupations, and his occupation lends itself to much more risk than the average person.
Comparing the risks between primary residence and rentals is not a level playing field.
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a house bought for flipping is not the same as a house that is bought for rental, if you buy a house with plans on turning right around and selling it you would just be sliding your money around so it would not make too much difference ,the risk really on how quick you can fix it up and get rid of it before your carrying costs kill you
a rental is a property that you rent out monthly and collect rents , the risk being your renters will trash the place and not pay rent
how does keeping your self leveraged help in that situation?
the whole leverage yourself to the hilt a Carlton sheets seminar, I am not a fan of that, others are to each his own
ETA;
maybe I misunderstood your friend fixes up rental then rents them out? that not what I think of as flipping
fixing up rentals then renting them is the most heart wrenching thing to do,spend all that money then watch your place get trashed, I would definitely want to cash flow that and not finance it, but differant business models work for differant folks