Flipping Vs. Renting Properties: Which Is More Profitable?
If you are new to the real estate industry, consider looking into flipping or renting a property. Both are very popular real estate strategies that generate income. But you may ask, which one is more profitable? Before everything else, you must first consider yourself and your goals. Flipping and renting are two different things that may or may not fit your needs. Therefore, you must put yourself first before choosing whether you should flip or rent properties. After all, every investor’s success is different. Want to know more about the battle of flipping vs renting properties? Here is some important information that you should know.
What does Flipping Mean?
If you are a risk taker, house flipping may be something you would want to look into. It’s an investment strategy where you buy a property at a low price, make adjustments and improvements to increase its value, and then sell it at a higher price. Its main goal is to get profit from the difference between the purchase price and after-repair value sale price.
House Flipping’s Pros and Cons
Undoubtedly, there are pros and cons to any investment strategy. The good news is, house flipping if done correctly, has a high-profit margin. Furthermore, you also have the flexibility to choose which projects to take on and where. This gives you control over the projects and the potential return on investment. You also get to build up your real estate portfolio if you successfully flip multiple properties. However, again, flipping is a high risk. You will need a huge amount of initial investment to start with. And because the real estate market can be unpredictable, it is difficult to find out when is the right time to buy and sell a property.
What does Renting Mean?
This may be something you are familiar with. Renting as an investment strategy refers to purchasing one or multiple properties and rent out to tenants. Its main goal is for you to generate a passive but steady income through a time-basis rental income. With renting, you do not need any renovation skills.
Renting’s Pros and Cons
Aside from getting a passive and steady income, renting is a low-risk strategy. There is predictability and stability with it. It also comes with professional management that decreases any potential problems with handling the property. Furthermore, it has tax benefits such as deductions for mortgage interest and depreciation. However, renting comes with disadvantages. Its major disadvantage? The tenants. As an investor, you are subjected to tenant risk as you rely on your tenants’ ability to pay rent on time. You should also take into consideration how they manage your property as maintenance can be expensive. Renting has a big competition. As the market fluctuates, so does the risk of not getting a high rental income.
It All Comes Down to This
Before you choose to flip or rent a property, you must first consider your financial situation. Know how to finance a property and your expected returns. Know what risk you are willing to take. Moreover, look into the market conditions, location, renovation costs, and even time commitment. Assess if you are looking for a short-term or long-term commitment. Are you still confused about which strategy to play? Contact us at Real Equity Acquisitions to learn more.