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Flip or Rent?

Now that you’ve decided to enter the real estate investment world, it is only natural to consider which strategy would offer the best return on your investment, fix-n-flipping (flipping) or buy and hold (renting).  In short, both of these strategies are effective and afford an excellent way to boost income.  This article will provide you with the differences between flipping and renting.

FLIPPING

The basic process of house flipping is to buy the property below market value, repair, improve or restore the property and place it back on the market for sale at market value.

RENTING

The process for renting is simply to buy the house, repair, improve or restore the property, and rent it.  The monthly cash flow will produce passive income.

DIFFERENCES:  

Active vs Passive:

The Flipping strategy requires active management.  You will need a crew to renovate the property.  You will have to manage permits and licenses, and the overall performance of the project.  With the flipping strategy, you can only make money after you flip the house.  The more houses you flip, the more money you make, producing an active income stream.

The Renting strategy requires you to purchase and possibly renovate the property just like the flipping strategy, but once the property is filled with renters, the rental payments generate cash flow and a passive income stream.

Cash Flow:

Flipping brings in big cash at one time while renting brings in steady cash over a period of time.

ADVANTAGES TO FLIPPINGDISADVANTAGES TO FLIPPING
Quicker returns on InvestmentsCan be risky
Fewer property management tasksHigher Taxes
Unexpected costs
ADVANTAGES TO RENTINGDISADVANTAGES TO RENTING
Steady ongoing cash flowLong periods of vacancy
Lower taxesMaintenance cost and property management
Increase in property value

CONCLUSION:

There are many things to consider when deciding which strategy to use.  Consider this, if you are an investor seeking to make quick money in the short term, fix-n-flip may be the better option.

Conversely, an investor with more time and money but requiring regular income may consider buying a rental property.