This is the second of the series of posts reviewing the book, Fix ‘em Up, Rent ‘em Out: How to Start Your Own House Fix-up & Rental Business in Your Spare Time. The author, Terry Sprouse is also the blogger behind the blog, Fix ‘Em Up.

Right away, Terry explains to us that there are many good reasons as to why you should consider investing in fix-up homes.

Shifting from Assets to Income

This is a powerful point Terry points out immediately. You may have heard of this before as I have from other people.

Experts say that we need to change our mindset from “assets” to “income” in retirement planning.

Terry points out that you can build a portfolio of rental properties that can generate income for you that will provide you with a peace of mind knowing you will have regular income coming in after you retire. He points out five simple reasons for rental properties.

• Cash Flow - After all the expenses associated with the property is paid, including the mortgage, vacancy rate, repairs, property management, etc…, you should have a positive cash flow that will provide you with income. Rent prices have appreciated over the years for various reasons but mostly related to demand.
• Housing Demand - One common oversight that seem to be missing is pointed out here, as long as our population continues to grow, there will always be a demand for housing. This factor is part of the fuel behind your cash flow.
• Appreciation - Historically, homes have always appreciated in value over the long-term. Terry points out an interesting figure, from 1970 to 2000 (a span of 30 years), the average value of a home has appreciated by 3 percent a year.
• Payment on Principle - Each mortgage payment you make, whether by you or your renters, is a payment on the principle of your rental property. Over the long term, it will eventually reduce the amount of money you own on the mortgage and increase the equity of your property. That along with appreciation is a powerful combination.
• Tax Advantages - Since your rental property is used to conduct business (renting), you can depreciate your investments. (Editor’s note: Be sure to consult a professional tax attorney in these matters.)

These are all five very solid reasons to be investing in rental properties. Terry moves on to explain the risks associated with such an investment. There are so many different types of risks involved with specific investments. The biggest factor he points out here is you retain control over your investments. As opposed to stocks where you relenquish control to your stock manager, you retain the control of how much you have to invest in rental properties.

There are two ways where you can reduce risk when buying a fix-up home for rental,

1. Since these homes are not in “move-in ready” conditions, you may find homes selling for less than full market value. This means the mortgage on the property would be significantly less than a prime real estate property. This has an added benefit of giving you additional money to make necessary repairs.
2. Eventually when you fix up the property, the value on the property will rise which allows you to increase the profit on your investment. Along with mortgage payments (specifically by your renters), and appreciation, your profit increases more than a move-in ready home.

The final piece of wisdom in this chapter merits a mention here as I close out my review.

It’s better not to quit your regular job because loan companies like to see regular income, and your job will provide money for fixing up your properties. It’s also nice to have your salary as a secure income source for times when unexpected expenses occur, or when you are between tenants.

Why would you consider a rental property?

Read more to find out how you can win a free copy of this book .