Renovate to Rent: How to Flip a Fixer Upper Into Passive Income

Aging fixer-uppers, home foreclosures and neglected run-down homes have long been the domain for house flippers (and HGTV series). Problem homes are snapped up for a bargain and sold immediately after renovation (or ‘flipped) in hope of a quick profit. But what about those playing the long game? Passive income could be more beneficial for your financial situation in the long term and less risky than a quick-flip. 

In this article, we’ll show you how to turn a fixer upper into passive income without taking on a huge amount of extra work and responsibility — by letting Belong manage the entire project end-to-end. 

House flipping vs. renovating to rent

Homes that need extra love sell for below-market rates, because more money is needed to bring them up to a livable standard. Once ready, if you don’t plan to live in the home, it can be sold immediately (flipped) or held on to for the rental market. 

Flipping is not technically an investment strategy. This is considered active income and you will need to work hard for this income as you prepare the house for immediate sale. This can provide a faster return, but the costs and capital gains taxes can be high. There are also high risks involved as costs can mount quickly and the market may dip while you’re under construction. 

Renovating to rent on the other hand, is an investment strategy as you will be holding on to the home long-term for the purpose of generating passive income. Investing in renovation and holding on to a property for the rental market can pay off in many ways:

• A recently-renovated home can attract a higher rental price and your pick of quality residents to care for the home

• You will enjoy tax benefits while you hold an investment property, if it’s rented by long-term residents (not family or used as a short-term vacation rental)
  
  
• A well-managed home can generate passive income for years to come

• The home should increase in value over time and you can benefit from appreciation, because renting allows you to hold on until the right time to sell, further adding to your return on investment

How to earn passive income from buying a fixer upper to rent

Before you get too excited about a bargain property, there are two essentials you’ll need to cover off if you want to enjoy passive income and turn a fixer upper into a solid real estate investment: 

1. You need expert advice from at least one qualified and experienced contractor about the costs of a renovation to bring the home up to code and attract a strong rental price for the location. 

2. The home will need to be well-managed so that you don’t have long vacancies and won’t need to lift a finger to generate rental income. From marketing to placing the right tenants and collecting rent, there’s a lot of work behind the scenes that needs to happen to achieve truly passive income. 

This is where Belong can help in a way no other builder or property management company can. Before we market a home, we conduct a thorough home inspection to assess for the structural integrity and safety of the home, as well as the functionality that will attract long-term renters. And because we specialize in homes for the rental market, we know exactly what your property needs to attract an optimized price for your home’s location. 

Learn More: Discover Belong PRO, the best alternative to Property Management in Seattle, Redmond, Oakland, and many more cities across California, Florida and Washington State.

Learn more about passive income and peace of mind with Belong

If you’re considering a ‘renovate to rent’ strategy, Belong can help. From expert advice to placing long-term residents, and keeping your home well-maintained — we handle it all.

Why? Because Belong wants to bring real estate investment back into the hands of individual investors, helping homeowners to achieve financial freedom. See why thousands of US homeowners are ditching outdated Property Management in San Francisco, San Diego, Los Angeles, Tampa, Jacksonville, Concord, Berkeley, Orlando and more.