Buying Rentals in Subdivisions...

[Jason Merchey]

I'm a little worried about getting a buy and hold in a subdivision. Here in Charletston, SC, subdivisions are fairly common, as I imagine they are in most areas. I am a home inspector, and will soon have an infrared camera to help me get to about 95% sure I know what a house will hold for me in the future.
Two things I am less confident about are: 1) the construction quality (is it a "cracker box", did the foreman let the guys cut corners to make a deadline or save a buck or simply because he was too busy) and 2) if the home in question turns out to inspect well, how how well the neighborhood is going to fare over time if it's less than 5 or 10 years old? I imagine that I can pretty much get a vibe about an older, established subdivision, but if I wanted to buy new or recently-built, let's face it, many of the big builders don't put out a great product and sometimes don't stand behind their work.
I imagine that one way to get intel is to ask my Realtor. There is a 33% chance she would know. Second would be to query neighborhood folks about their own house, and the word around the campfire (I avoided a house last year because the woman I met in her front yard had a story or two about mold and contractors not being all that satisfactory in response to it (I know, negatives rise to the top more easily than positives do, but still, I became worried and began to fret about big builders).

Part of me wants to work harder for a living and do 1-3 fix and flips a year, the other wants to get into a buy and hold so as to use leverage. If I got with the rental property, what thoughts do you have about how to determine if a neighborhood is going to rise or sink over time, and how to safeguard my investment?

[David Krulac]

@Jason Merchey

You have a big advantage to almost all buyers by being a professional home inspector. Your professional expertise will be very valuable to your personal investment portfolio.

I do both buy & hold as well as flips. People have said to me that if you buy and hold, that limits the number of properties that you CAN buy.

I say the buy and hold limits the number of properties that you HAVE to buy.

By your calculations you need 50 flips over 25 years. If you keep properties instead of flipping them you will not only keep the rents for the next 25 years, but you will also keep all of the future appreciation. Eventually in a buy and hold scheme, you will pay off the mortgage debts and the positive cash flow will magnify your returns.