Which is the best style of real estate investing for you: house flipping or buy-and-hold real estate investing?
To obtain an answer, it will help to identify each phrase and put them each in proper perspective.
House flipping is the strategy of purchasing real estate and then selling it for a gain in the quickest time possible. A house flipping pro aims to make the biggest amount of cash in the shortest time possible. In fact, the longer the house flipper holds onto the property, the less likely he is to make significant profits.The house flipper does not hold on and rent the house. The point is that the longer the house stays on the market unsold, the more the house flipper spends on carrying costs such as financing, income taxes, insurance and maintenance.
Buy-and-hold real estate investing is all about buying and then holding the piece of real estate for a significant period of time, then selling it later for a profit.
Buy-and-hold real estate investors purchase real estate and may intend on selling at some point, but not for a while. Their main goal is income through collection of rents from tenants.
Which form of real estate investing is right for you?
The big difference is house flipping pros get their money back fast with a quick sale, whereas the real estate investor wants income and appreciation. As far as which one is best for you, it depends on what your financial goals are. The best part of all is that you may not have to choose one or the other, many house flippers have some properties that they buy-and-hold and likewise many buy-and-hold real estate investors flip houses on occasion.
House flip guys aim to get property for the cheap then rehab quickly and then sell quickly. In doing so, it guarantees a quick profit from a quick sale. In most cases, house flippers by real estate that may need some work or “rehab” that if done cheaply and quickly can create quick appreciation so that the home is sold for a higher price than what they originally purchased it for.
Typically, the real estate will likely be purchased at a cost significantly less than its selling price (within the range from 40-80% below the prevailing market prices).
Renovating fixer uppers in need of serious rehabilitation is a popular way to house flip. The house flip pro purchases the house, quickly renovates it and then sells it within six months. To do this effectively, the house flipper needs to have general contractors and workers. He depends on to give him act rehabilitation costs, so he can project out his potential profit or loss.
Taking a beat up home and renovating it is a time tested way to house flip because in most cases, you can easily estimate rehab costs on the front end. It can be possible to acquire specialists who understand the exact renovations required and the house will look really good for a quick resale when it’s done.
This allows the home flipper to get a quick market for the house and at the same time getting a great price for the home.
In most cases, flipping houses is less of a hassle because you don’t need to deal with renters and other kinds of landlording issues. The house flipper buys, renovates and sells, it’s very simple.
Dependent on market conditions and location, the house flipper can make higher return on investment (ROI) if he/she can manage to flip the house relatively quickly. In direct contrast, the buy and hold real estate investor makes his return over time through rental income and appreciation over years of holding the property.
With buy and hold real estate, the investor makes money through “passive” income, provided his expenses are less than his income from rent. A major advantage in buy-and-hold real estate investing is if the market is poor, he can hold on and receive income and not worry about resale.
Additionally, the buy and hold real estate investor can enjoy a steady stream of income without spending money on major reconstruction. Most buy-and-hold real estate investors make relatively minor improvements to the properties they purchase. In most cases, these rehab costs are relatively minor compared to those of the house flipper.
Although there are advantages to both kinds of real estate investing, I personally like house flipping because of the quick profits that can be made. This is especially true, the more house flip’s you do. As with anything, the more you do it the more experience you gain and in the case of house flipping, the more profit, you can realize.
But don’t discount buy-and-hold real estate investing either. Buy-and-hold real estate investing is a very cool way to create steady streams of passive income. And although the passive income may not be as passive as many real estate investors may claim, buy-and-hold real estate investing is very attractive, especially as a way to diversify your financial portfolio.
What do you think is the best, buy-and-hold real estate investing or house flipping?