Flipping Vs. Buy and Hold
Are you an individual looking to get involved in real estate investment? Are you still confused about which is the best option for you? Read further to find out which investment strategy will edge out the most in your situation. I’ll go further with the various pros and cons of both strategies so you can make a much-informed decision.
This is the process of buying a real estate property at a discounted rate, make a few upgrades and improvements and selling it for a profit. This process requires money and the effort of buying and improving the house and later selling. The flipper tries to get the property sold in the shortest possible time which highly reduces the carrying cost. The faster a house is flipped; the more profit is made.
- Instant cash: compared to buy and hold, this investment strategy leads to a much faster gains. This makes the investor cash trapped for less time with instant profit as soon as you sell.
- Less Time: Since the flipping process is done as soon as possible, the cash comes faster than with a buy and hold strategy. This process can as well boost an investor’s confidence and give experience in the field.
- Fewer Hassles: The number of issues reduces with lower carrying costs, and when compared to the buy and hold strategy, you don’t have to deal with tenants.
- Tax Issues: Since we’re dealing with short term investments, it comes with its own set of tax implications. Before you get excited about the profits you’ll make, you have to consider these as well.
- High Investment Cost: You might be moved with the fact that you can make quick money with flipping; however, things might get nasty if you don’t have the funds you need. The short term investment is proven to be expensive. This is because it comes with higher interest rates. Most people don’t think of the fact that this investment can get quickly stuck with your cash trapped.
Buy and Hold Strategy
This strategy is known to bring great wealth and cash flow in the long run. It is a dream investment for many real estate investors for its many high promises. This is due to the fact that real estate has always bounced back when it comes to decreasing land prices. It’s all a matter of time. In this, a property is purchased by an investor and hold onto it for longer, if not forever. You may be required to carry out a few improvements. Let’s take a look at a few points that comes with the buy and hold strategy.
- Get Rich Slowly: This doesn’t start out fast but, in the end,, there is a great amount of wealth and liquidity. The secret is simple. With the ever-changing real estate values, the more you hold a property, the more it will appreciate. This can only be possible with buy and hold.
- Not a Full-Time Job: Once the property is stabilized and leased out, there’s nothing much to be done. Unless you own several assets, buy and hold is typically not a full-time job. This strategy gives you time your daily job while building a portfolio of rental properties on the side to increase your income.
- Peace of Mind: Owning properties with steady, positive rental income is a very effective way to offset expenses and guarantee cash flow constantly. The most common lease agreement has a one-year length, often with automatic renewals. This is a certainty of income to an investor which comes with peace of mind.
- The Headache of Being a Landlord: Being a landlord is great, this means you now have to deal with independent adults living on your property. Starting from here you buy, what you buy, who you lease to and just plain luck. Still, you have the problem of property and people management you need to deal with on a regular basis. You’ll come across times that being a landlord is incredibly stressful.