If you’re attempting to build your investment portfolio with a foundation in real estate the most common question many investors have is: should I flip it or rent it? Before investors attempt to answer that question they should heed the advice of “buy cheap”. Purchasing a property at a significant discount will prove to be easier to profit from regardless of which avenue investors follow.
Flipping a house allows an investor to get in and get out without much time invested. Flipping may be a more appealing option to investors if the market prices tend to be higher than average. The profit margin will depend on how much work needs to be done to the house after purchase and how quickly it can be sold after the repairs and updates are made. Investors also need to consider the costs associated with selling a property including realtor commissions, closing fees & taxes, and any buyer assistance than may be negotiated. Flipping properties reduces the investor’s liability considerably since the home will be vacant.
Renting a house is more appealing when the property purchase price isn’t as deeply discounted than the average market prices or the average market prices don’t allow for a reasonable profit of at least 10% of the initial purchase price after closing costs. Renting allows for the investor have a steady stream of income and a source of equity to draw on should the need arise. Holding on to a house for several years also for the property appreciate in value and possibly earn a larger profit.
Both options have the potential for making solid profits for an investor. If considering renting a house, investors should evaluate their readiness and ability to be a landlord. Investors should also research the nuances of a specific market and have a well outlined plan for rehab if considering a buy and flip.