One of the primary decisions that single-family Eagle real estate investors make is: flipping or renting? While house-flipping may provide a few advantages, many house flippers also encounter significant risks and frequently make significant sacrifices to get the property ready to sell. Oppositely, buying properties to rent can become one of the quickest techniques to grow real wealth without the risk or sacrifice of flipping – as long as it is done appropriately. To figure out why rentals are a better investment than house flipping, let’s review the pros and cons of both.
Flipping: The Pros and Cons
For many people, flipping houses is a serious investment of money and work. The reason house flipping catches the attention of numerous investors is because of the potential for a massive, one-time payoff. And there are a couple of house flippers who have made significant money.
However, that expected payoff carries a very substantial set of risks, beginning with having your money tied up in a flip for as long as it takes to renovate and sell it. You only gain revenue after finding, buying, remodeling, and then reselling the property. For several investors, that suggests your income is limited to the number of flips you can do in a year.
Flipping is also highly volatile, with various possible hazards that can quickly eat into your profits. For instance, there’s no guarantee that the bargain property you obtained will appreciate or be sold for as much as you imagined once it’s ready to sell. Your income is absolutely at the mercy of fluctuations in the real estate market. Rising costs of materials, a shortage of qualified service providers, unethical or dishonest contractors, as well as some other issues can also make your renovations more costly, lowering your potential payoff in the end.
Zillow: A Case Study
For a high-profile example of flipping gone wrong, think about the story of Zillow. The corporation elected to get into the house flipping game by purchasing homes for sale and then turning around and selling them at a profit. At least, that was the desired purpose. The problem is that Zillow could not sell most of the purchased properties, leaving them with 7,000+ homes now worth less than what they paid for them. It’s every flippers nightmare – on an enormous scale.
Investing in Single-Family Rentals
The optimum method to reduce risk while growing wealth is to invest in rental real estate. Single-family rental homes have proven time and time again to be one of the finest strategies for real, long-term profitability. There are various fundamental explanations behind this.
Initially, one of the key benefits of investing in rental homes is the capacity to generate short-term cash flows while growing your property values. As your properties appreciate, the benefit when you sell keeps pace with inflation over the years.
There are very few investments that can guarantee the same! Rental properties look very stable in difficult economic circumstances, supporting single-family rental property owners to maintain a regular monthly income. There are also multiple tax benefits to owning rental properties, which can add up to large savings over time.
Probably the major factor why some investors avoid single-family rental homes is because of the management they demand. While owning rental homes commonly takes less time and effort than flipping houses, rental homes still need active management to stay profitable.
The good news is that, when handled effectively, you can streamline your investment properties and reduce the amount of time they will require of you. When you hire a quality Eagle property management company, you can transfer most day-to-day tasks off your calendar, giving you the opportunity to focus on growing your investment portfolio.
Reach out to Real Property Management Boise to learn more about our full range of high-quality services. You can call the office or contact us online.
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