Fix and Flip vs. Buy and Hold—A Comparison for Real Estate Investors
Real estate investing can be a very exciting business. It can also be quite lucrative when you know what you are doing. The goal is to find properties for a good price and then make money out of them. However, there are different ways to turn a real estate investment into a profit center. The two most common business strategies are:
- Fix and Flip—Buy a property that needs some work (or a full renovation). Then, fix it up and resell it for a profit. Also known as “house flipping.”
- Buy and Hold—Purchase a property and then hold onto it for a longer period of time. Rent it out for monthly income, as well as earn through long-term property appreciation. Also known as a “rental property” or “income property.”
Which is the Better Investment Strategy?
This is the million-dollar question that new real estate investors might have. Do you buy investment properties with the intention of flipping them for a quick profit, or do you invest in rental income properties for long-term gains? The truth is both of these strategies can be very effective. You can make a lot of money by investing in real estate, whether you choose to fix and flip or buy and hold. Let’s compare the pros and cons of each approach to help you decide which might be better for you.
Fix and Flip—The Importance of Planning and Budgeting
Flipping a house isn’t quite as easy as they make it look on TV. It does take a lot of hard work and careful planning. Whether you do the renovation yourself or hire construction experts, you will be spending time and money to get the property fixed up. Budgeting is extremely important with fix and flip investing. So is running thorough property analytics before you commit to purchasing an investment property. You have to make sure the house is worth the effort to renovate and resell. Ideally, you want to purchase the property for the lowest possible price. Then, you need a proper renovation/repair plan to get it ready for reselling. Lastly, you have to get the property sold at the highest possible price. Each of these steps is critical to success, so this is why smart planning and budgeting are essential if you want to be a successful house flipper.
Buy and Hold—Property Management is Key
A buy and hold investment may offer a little more wiggle room compared to the fix and flip method. You have more time to recoup your investments. However, it is a much slower game and require patience. It also requires just as much planning and budgeting as house flipping. First, you have to find a good property that will be easy to rent out for a good monthly price. You may invest some time and money fixing up a place that needs some work, or you can look for rental properties that are ready for tenants right away.
The real key to success comes with how you manage the property. You’ll want to keep quality tenants occupying the unit and paying their rent on time. You have to minimize any vacancy periods and avoid tenant problems—all while taking care of the property and keeping it from falling into disrepair. With the right property management skills (or budgeting extra to hire a professional property management company to handle the day-to-day issues), you can generate a consistent income while also benefitting from appreciation gains over time.
Join the PropertyLark Investment Network
Whether you are pursuing fix and flip investments or buy and hold opportunities, you’ll want to have the right resources and access to great properties. Consider joining the PropertyLark network to get more out of your real estate investment business.