So, you’ve just bought a property with the intention to renovate it and flip it for some cash – should you sell the property or rent it out? In either case, flipping houses is an investment of your time and money.
The two options should be carefully weighed to ensure you’re getting everything you want out of your investment, and that it’s really worth it.
Flipping Houses to Sell – Pros
When you buy a house, renovate it, and sell it, you can get a pretty fast return on your money. In Maryland, the average profit on a flipped house is over $100,000 and it takes about 6-months to complete.
Flipping houses to sell could also be considered a safe investment, especially if there is a healthy housing market in your area.
You don’t have to worry about the risks, maintenance, and repairs that are associated with leasing. Once you sell the property for a good price, your risk is removed altogether.
Flipping Houses to Sell – Cons
There is a lot that you have to pay for when you flip a house to sell. These costs include closing costs when you purchase the property, renovation costs, landscaping, staging, marketing, realtor, and negotiation costs. There is no guarantee that you’ll get the price you ask for! All of these costs could seriously affect your bottom line.
You also have to consider the face that flipping a house to sell will create a sudden uptick in your income – or downtick if you’re unable to sell the property.
Sudden increases in income often mean that you have to pay significantly more in taxes, while unsold properties can be financially draining.
Flipping Houses to Rent – Pros
One of the best things about flipping houses to rent is the fact that you will receive a regular check, so long as you have a tenant.
Buy-and-hold properties generate income that you can receive from anywhere in the world – you don’t have to live in the city, state, or even the same country as where you own a rental property to benefit from the passive income it generates.
Holding on to property and renting it out can also increase your income overtime. As property values increase, you can raise the price of rent, pay the mortgage off faster, and make that property really profitable.
You also get a lot of tax breaks when you own rental properties. Your monthly rental checks are considered to be investment income, which have lower tax rates than active income checks do. You can also claim the costs of maintenance, travel, marketing, and more.
Flipping Houses to Rent – Cons
There are costs to consider that rental property owners aren’t able to write off on their taxes, like vacancy costs.
If your property isn’t rented out for months at a time, that’s money that you’ll have to miss out on while still paying the mortgage and upkeep costs.
You should also take into consideration the amount of time and money it will cost when you run into legal issues, irresponsible tenants, unexpected large repairs, and general maintenance on the property.
Finding reliable tenants and making yourself available to handle their needs can be incredibly time-consuming and expensive, especially if you choose to run background and credit checks.
Hiring a Property Management Company
In the end, there isn’t a definitive answer to the question, “Does flipping houses or buy-and-hold properties make more money?” It will really depend on where you live and how you go about dealing with your real estate investment.
That being said, a property management company can help you get the most out of your investment for years and years to come.
See how Moon Ridge Management can help you generate passive income and make the most out of your investment!