Flipping Vs. Renting: Definitions
Before you can determine if real estate investing through flipping houses or owning a rental property is right for you, it’s important to fully understand what each of these methods involve.
About Flipping Houses
House flipping involves purchasing a house or other residential property at a low purchase price and then turning it around to sell it for a profit. Often, this means buying distressed properties and completing renovations to increase the home’s value before selling. When buying a distressed property to flip, it’s important not to overpay for the home, and to complete the renovations as affordably as possible. Remember, the goal here is to maximize your profit, so you’ll want to spend as little up front as possible to ensure you don’t lose money in the transaction.
Flipping houses can also involve purchasing homes from sellers in financial distress. These homes are often listed below market value in order for them to sell quickly. These houses may still need some repairs and renovations before they’re ready to sell, but they may not need as much work done compared to distressed properties.
About Owning A Rental Property
Buying a rental property is sometimes called the buy-and-hold method of real estate investment – because you buy an investment property and hold onto it rather than sell it. While you may be able to find an investment property that doesn’t need much done in terms of work, you’ll have other responsibilities to consider. You’ll be responsible for finding tenants, collecting rent and maintaining the property. You’ll also have to pay property taxes and homeowners insurance. You can enlist the help of a property management company to take care of the day-to-day responsibilities but remember that this will cut into your profit.
