The flip advantage is called an advantage for a reason. For, if you dream of firing your boss and sailing off to The Bahamas, or are looking for a little free time with your family, or want the ability to create wealth for yourself and future generations, flipping is valuable and can make your aspirations become a reality. Whatever reason brought you to real estate, you made the right investment.
Everyone’s interests, goals, and skill sets are different. Some are better inclined to use the flip advantage by flipping houses than rentals and vice versa.
The flip advantage
First of all, let’s define the two terms; the flip advantage, or flipping, is the practice of buying a fixer-upper, fixing it, and then selling the beautiful home for top dollar. You’ve seen the TV shows do it. The amount of profit you make per deal depends on the location. The profit margin further depends on the price point and how good of a deal you got when you bought it. Profits between $25,000 and $75,000 are most common for an average house flip.
Rental property investing is buying a property, a house apartment that can undergo leasing, tenants. Unlike flipping, you don’t get to make a ton of money in the short run. You make profits over time. Profits from rental properties are made in the form of the four wealth generators.
The four wealth generators of real estate
So, which is the best strategy? Well, what are you looking for?
House flipping is an awesome and incredible way to generate a lot of money. It can replace a job. House flipping can further undergo systematization. Allowing you to work fewer hours while making more income. It is a business. You can hire a property project manager to oversee it. This way, you’ve got yourself a nice little business generating incredible profits. Rental property investing is awesome for long term wealth building and passive income.
This is possible through the four wealth generators of real estate:
- Cash flow: Extra money that you earn every month in profit
- Appreciation: The value of property climbing over time.
- The loan pay-down
- Tax benefits
Rental property investing is awesome because you can estimate your financial future. In a market crash, people will have a place to rent. They’re recession-proof as long as you buy solid deals with solid fundamentals.
House flipping vs. Rentals
House flipping is a passive business. You’re dealing with difficult contractors, deadlines, and shipment delays. You will further have that never-ending thirst for more deals. If you can’t find a good deal, your entire business model dries up. This means you so need a consistent marketing machine to generate leads. The profit made from flipping is taxed more compared to rentals. To be good at flipping, you need to be good at running a business. You can’t buy a nasty house and hope it’s going to turn out well. In a market crash, house flipping can turn out bad.
For rentals, you have to deal with tenants. As we all know, they aren’t the most fun to deal with. They can trash the place. They can turn into hoarders, or they can just refuse to pay rent. Of course, land lording is a skill that one can learn and improve. Over time houses break down. Things need replacements. So even with a good tenant, you’re going to have expenses. That’s why it’s so important to analyze deals in the correct manner. Saving money for those future repairs is paramount.
You may discover the flip advantage by watching this video on house flipping vs rental property:
