Flip or Rent – What is the Best Way to Invest in Real Estate?

When trying to determine what route you should go when entering the world of real estate investing, you first need to understand your goals. Are you trying to build your “nest egg”, so you can retire earlier and with more passive income? Or are you looking to quit your current job, and take on a new one that provides more independence and growth?

Deciding on whether or not to flip properties or to lease them out is not always an either/or question. Often times, real estate investors start with one and switch to another, or do both simultaneously. Further, house flipping isn’t really an investment in the way owning rental property is. Flipping is a job and requires hard work and daily involvement to generate any money.

So, I ask again, are you planning to keep your current job but, are looking for a way to increase your retirement “nest egg” or even retire earlier or are you looking for a new and exciting career opportunity?

If you already have enough money to retire then using some of your extra cash to invest in multi-family properties or single family homes can add some nice passive income. Also, if you plan to continue in your current career, these types of rental properties can help build wealth over time and diversify your financial portfolio. You can protect and grow your principal investment while earning significant income on the side.

Managing rentals is a bit easier and takes less to manage compared to flips; so, is best for those working full time in another field or who are ready to retire.

However, if you are looking for a career change, and not ready or cannot afford to retire, flipping houses can be a rewarding occupation that provides a big paycheck as well as the independence that comes with self-employment. Then, once you build up more dispensable cash, you can start buying rental properties as well which will allow you to retire earlier and, hopefully, with a bigger “nest egg”.

Flipping Pros: Quick Cash and No Long Term Headaches which can come from maintaining properties and dealing with tenants

Flipping Cons: Need a lot of disposable time and energy to dedicate to project managing the flip and may be subject to high income tax and short term capital gains tax

Renting Pros: Long term, consistent earnings and can do it alongside working another full-time job or while retired. Also, renting can have tax incentives rather than further tax burdens.

Renting Cons: Have to deal with maintaining properties over long-term and potentially difficult tenants.

To put it simply, flipping is a business and owning rentals is an investment. You can be successful doing both separately or by doing them together. If you have the time to dedicate to flipping, you can then use the extra income to purchase rental property. Build up your passive income, so you can spend less time working. Despite your short-term goals, the long-term goal should always be financial independence and more free time to enjoy it.

For more information about real estate investing, Contact The Alfriend Group at (614)395-1776 or visit our website at www.AlfriendGroup.com

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