There is no clear answer to whether real estate flipping or buying and owning is the superior investment approach. Instead, it would help to base your decision on a well-thought-out strategy that considers your overarching objectives. The possibilities in the current market should also be considered. Examining the steps necessary to implement each tactic can help you choose which one is best for your situation.

Why Should You Put Your Money Into Real Estate?

That's an intriguing query. In recent years, there has been a dramatic increase in retail investors seeking to own their residential properties.

• Investing in real estate might yield more stable profits than equities or bonds.
• Rental increases and investment income from real estate hedge against inflation since them often increase by more than the inflation rate.
• When the future of traditional investments like stocks and bonds is uncertain, real estate may be a haven for your money.

Income from Passive vs. Active Sources

The primary contrast between purchasing and holding and flipping is the potential for passive income from the former against active revenue from the latter. Earnings from assets which generate further earnings with little to no effort on your behalf are considered passive income.

Investing in stocks and bonds is one option. Still, it so is buying rental property and collecting rent each month, provided you employ a management business to handle all the necessary responsibilities, such as finding tenants, collecting money, and handling upkeep.

Two Strategies for Property Flipping

Investing in real estate through a buy-and-sell strategy typically involves two main property categories. The first is financially troubled homeowners selling their homes or flats below market value.

The second type is the "fixer-upper," a home with flaws in its construction, layout, or current condition but still has potential for growth in market value. Focused investors on distressed properties seek out homeowners who cannot maintain or manage their houses or overleveraged properties at risk of default.

Choosing a Strategy

When deciding whether to flip houses or keep on to them for the long haul, it's important to consider a few key considerations. Investing in real estate may either be a long-term strategy to build wealth or a short-term play on rising housing values.

Determining the optimal risk-to-reward ratio for your portfolio allocation is also helpful. Lastly, it would help if you had the money and comfort level with risk to manage any form of investment.

Buying And Holding Property Has Several Benefits

A buy-and-hold real estate investment may provide returns equivalent to a dividend-paying blue-chip company. On the other hand, real estate isn't as vulnerable to market swings and has several tax advantages that other assets don't.

Rent Income

As a landlord, you may enjoy a steady monthly rental income with a buy-and-hold real estate investment strategy. According to a new analysis by CoreLogic, a major provider of property information and analytics, single-family rental rates would rise 11.5% a year through November 2021.

Property Value Growth

Real estate investment may be a good way to amass money over the long term. The Federal Reserve states that during the previous two decades, the median sales price of a home has climbed by more than 238%. Given good upkeep, a home purchased for $150,000 twenty years ago would be worth around $357,000 today, an appreciation of $207,000.

Cons Of Buy-And-Hold Real Estate

Buying and holding an investment property can have several long-term benefits. But there are costs to consider, just as there are with any other investment approach.

Illiquid

It is not uncommon for real estate to remain on the market for 30 days or longer, even when the owner is in financial difficulties and prepared to sell for less than the property is worth.

Property Management

Managing renters and fixing things may be difficult. There may be instances when you need to track down a renter to collect rent or make a late-night repair to your rental property. Hence, many landlords want to work with a property management firm.

Experience working with renters, knowledge of how to keep the rental property in good condition, and access to reliable, cost-effective contractors and vendors are all hallmarks of a competent management firm.

The Bottom Line

Your unique financial condition and objectives will determine which of the two options is the best fit for you. However, those who plan to employ real estate as a primary investment vehicle should consider the long-term holding strategy. In contrast, property flipping is typically more successful when real estate is utilised as a supplement or a method to increase profits.