One of the main evaluations that single-family Palm Bay real estate investors make is: flipping or renting? While house-flipping can provide certain advantages, most house flippers also face enormous risks and usually make significant sacrifices to get the property ready to sell. On the other hand, buying properties to rent can become one of the greatest paths to grow real wealth without the risk or sacrifice of flipping – as long as it is getting the proper approach. To fully comprehend why rentals are a better investment than house flipping, we will discuss the pros and cons of both.
Flipping: The Pros and Cons
For many individuals, flipping houses is a substantial investment of commitment and money. The reason why house flipping attracts numerous investors is owing to the potential for a substantial, one-time payoff. And there are a couple of house flippers who have produced big money.
But that anticipated payoff incorporates a significant set of risks, starting with having your money tied up in a flip for as long as it takes to renovate and sell it. You only acquire money after finding, buying, remodeling, and then reselling the property. For several investors, that implies your income is limited to the number of flips you can do in a year.
Flipping is also naturally volatile, with numerous possible difficulties that can quickly eat into your profits. As an illustration, there’s no guarantee that the bargain property you acquired will appreciate or be valued as much as you estimated once it’s ready to sell. Your income is totally at the mercy of fluctuations in the real estate market. Rising costs of materials, an absence of qualified service providers, unethical or dishonest contractors, as well as some other problems can also make your renovations more costly, lowering your potential payoff sooner or later.
Zillow: A Case Study
For a high-profile example of flipping gone wrong, take the story of Zillow. The corporation decided to participate in the house flipping game by offering to purchase homes for sale and then turning around and selling them at a profit. At least, that was the main goal. The issue 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 a massive scale.
Investing in Single-Family Rentals
The optimum method to avoid 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 greatest approaches to real, long-term profitability. There are multiple significant reasons behind this.
Firstly, one of the main benefits of investing in rental homes is the opportunity to earn short-term cash flows while growing your property values. As your properties appreciate, the reward when you sell keeps pace with inflation over the years.
There are very few investments that can claim the same! Rental properties tend to be reasonably stable in difficult economic circumstances, supporting single-family rental property owners to maintain a regular monthly income. And there are multiple tax benefits to owning rental properties, which can sum up to huge savings over time.
Perhaps the main reason some investors avoid single-family rental homes is because of the management they necessitate. While owning rental homes normally takes less time and effort than flipping houses, rental homes still need active management to stay profitable.
The good news is that, when done right, you can streamline your investment properties and reduce the amount of time they will require of you. When you hire a quality Palm Bay property management company, you can take most day-to-day tasks off your calendar, providing you time to concentrate on growing your investment portfolio.
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