When you decide to turn your love for home flipping into a business venture there are two choices for creating income. You can flip and sell the home or flip and rent the home. There is no choice that is better or worse but rather, which strategy will work for you based on your specific business goals. You may even want to sell some properties and rent others once you expand your flipping portfolio.
The first consideration is what your monetary goals are. With flipping and selling, you will have a smaller margin of profit but the turnaround can be faster. The benefit here is that the house will be sold quickly and you’ll see the profit right away, whereas with renting there may be time between tenants or even vacancies if no tenant wants your home for rent at that time.
If you sell the house, the money you earn is all yours to put toward your next investment, whereas with flipping and renting, you are responsible for maintenance of the home, so your tenants’ rent money may need to be factored into possible future upkeep. While you do have management tasks when flipping, selling afterward is a short-term investment. In just a few months the money is in your pocket and you are not dealing with collecting rent checks or tenant problems and evictions.
The main disadvantage to flipping and selling a house is perhaps the taxes. You will pay more tax than you would on rentals, and your income is controlled by the market’s whims. Any unexpected expenses during renovations would also cut into your profits as you are not collecting money after the home is sold.
Purchasing a distressed home, renovating it, and maintaining ownership while collecting payment from renters is your second option. This is a very popular choice amongst investors, as owning real estate is a lucrative and safe way to invest your money during the ups and downs of the stock market. Equity created in a real estate investment is a solid foundation for financing other investment opportunities.
Ongoing income and increased property values are two huge factors that attract flippers to holding onto their investments and renting to a tenant. Owning a rental provides you with regular income no matter where you are or what you’re doing. In addition the longer you own your investment property, the greater chance you will benefit from inflation. If you study the market and choose an increasingly attractive area, whether it be for schools, nightlife, or neighborhood, there is always potential for a significant return on your investment.
Owning a rental property gives investors an advantage not available to those who flip and sell. When your investment property is kept and rented, you can write off many of the expenses it takes to update and upkeep the property.
Overall, each investment property can offer something different to the buyer and the seller. The answer for which option works best for you may not always be the same, but requires careful consideration for your long term goals each time. Updating a property is a worthwhile business venture whether you sell or rent out your project.