If you’re thinking about investing in real estate you have probably already thought a bit about whether to flip properties, or rent them out. Investing in real estate can be a very profitable venture, bringing you more predictable returns than the stock market while also building equity in the property. Flipping and renting can both bring you these benefits, but they are different strategies that involve different tactics, and you should think carefully before jumping into either one.
Here are some questions you should ask yourself when deciding if you should flip a property, or hold on to it and rent it out.
Are you looking for quick cash, or a long-term, steady income?
If you’re looking to make a large amount of cash quickly, then flipping a home might be your best bet. When you purchase a home to flip, you’ll probably purchase one that isn’t in great shape and needs a lot of repairs or updates, which means that, most likely, you’ll get a great price on the property. As long as you manage your spending while fixing it up, you’ll probably be able to sell it for a much higher price than you purchased for, making a good amount of money on a single sale.
On the other hand, renting out a home may cost you a little more up front, since you’ll have to purchase a property that is in livable condition (or very close to it). However, renting will provide you a steady source of income for an extended period of time. Ideally, the property value will increase as well, which means that your equity will also increase.
How much time do you have?
Both flipping and renting require investments of your time and money in order to be successful. Flipping a house will keep you very busy for several weeks or months. Besides finding and purchasing the property, you’ll have to manage the home improvements and repairs, to make sure everything stays on time and on budget. You’ll also have to put some work into selling the property when you’re ready.
Renting will take some time and effort as well. You’ll have to market and show your house to potential renters, perform any necessary repairs or maintenance, and be available to handle any problems that arise when your tenants need you.
If you’re looking for a more hand-off experience, consider using a property management company to help you with these hassles.
What do the numbers say?
Ultimately, your goal is to make as much money as possible, right? If you have a specific property in mind, and you are trying to decide how to use it, run some numbers to help you out. How much could you buy it for? What are comparable homes selling for in the area? How long might it take you to find renters? How long would you plan on holding on to the property before selling, and what will the housing market do in that time? Knowing these numbers will help you greatly as you decide whether to flip or rent. If you’re unsure how to find the answers to these questions, talk to a realtor, or better yet, a property management company, for a better perspective.
Flipping and renting can both be profitable ventures, if you know what you’re doing. Decide what your end goal is, run a few numbers, and get ready to reap the benefits of real estate investment.
Want a great property management company to help you market and manage your investment properties? Contact Real Property Management at 480-719-1243 to discuss your options. We’d love to help you make your investment profitable!