You have to analyze your personal situation and what you want out of the investment before making a decision on which avenue is best for you. For example, say that I am someone who doesn’t like dealing with tenant issues. Or maybe I don’t being in charge of repair work but, I still want solid returns from my investments. In this case, buy and hold might be the better option since it provides more stability than fix and flip.
Reasons to Invest in Real Estate
Thousands of people are getting involved in home flipping, and for good reason. First, the returns on investment are more predictable than stocks or bonds. Also, the slow build of equity allows for financing other investment opportunities. But, which method of investing is best? Let’s explore the differences between the fix and flip and the buy and hold methods.
Consider How Much Time You Have
The fix and flip method provides you the opportunity to make a quick profit with little risk. When conditions are right, home flippers who choose this method can produce up to $30 grand in very little time. This way, they can recoup their initial investment and then some!
The buy and hold method is the slowest way to see a return on your investment. It often takes years to produce any significant results. With this strategy you’re counting more heavily on market appreciation than capital appreciation. Longer-term investments in real estate have been known for their ability to increase over time. So, with buy and hold, there’s greater likelihood of profit as well!
How Much Risk Are You Willing To Take On?
When it comes to deciding whether to fix and flip or buy and hold, the risk is often what makes people decide. Still, those with the greatest risks can create a great reward for you as well.
A little research will allow an investor to predict accurately the short-term direction of the real estate market in your area. So, if you have your heart set on the fix and flip approach as an investment strategy, it’s worth considering whether or not now is really a good time. Some factors like current interest rates and available credit facilities can complicate this fix and flip strategy. But, most houses bought for the purpose fixing and flipping are in a state of distress. That means if you don’t have experience or know what you’re doing, it won’t be easy to get out unscathed. This is especially true when rehab costs can easily exceed any potential profits!
Despite the many benefits of a buy and hold strategy, it is possible that you will lose money. If forced to sell during these times, your profits may be diminished and could even turn into losses if holding an appreciating asset with no liquidity date in sight. But because markets trend upward over longer periods, many fortunes have been made by this method. Also, buying and holding then renting affords a steady predictable stream of income with less risk than having everything hanging on the sale of property as is the case with flipping.
Be Prepared for Some Hassles
But what if you just want to take the easiest route? Both have their pros and cons. With the fix and flip, there will be no tenants to deal with which can save lots of hassle but also costs more in upkeep. Fixing is a better choice for those who are able to pay extra expenses like property taxes or mortgage payments too.
You would think that the buy and hold tactic in investing in a house and renting it out is the ultimate safety net. However, this tactic can cause its own headaches from dealing with renters to legal management issues. But all these problems are worth putting up with for reliable income without worrying about flipping houses within certain deadlines!
If you’re trying to decide which exit strategy is for you, hopefully this will help weigh the pros of each. But if it’s just too much work on your own, give us a call or visit floridapropertywarehouse.com! We’ll be happy to guide through all aspects of either purchase option so that make sure whichever one we choose benefits you in both short-term investments as well long-term goals.