Buy-to-Flip or Buy-to-Rent Real Estate Investment
When you acquire a residential investment property, what is your best strategy—renting or flipping?
When acquiring a residential real estate investment, you will typically have the options of buying real estate to quickly fix and flip or buy to rent. There are key differences to note when deciding which real estate investment objective best suits your needs.
You may want to buy to fix and flip, meaning you buy property at a bargain price hoping to quickly make some quick fixes to give the property some increased value then resale at a higher price to profit. This is also referred to sometimes as Real Estate trading, key characteristics of a real estate trader include;
- Short-term investor in Real Estate looking for quicker return on investment
- Holds property for 3 to 4 months (or more depending on market conditions) and then sells for profit
- Buys undervalued bargain property or a property located in a hot or upcoming area to make a quick sell (flipping)
- Being unable to sell the property quickly as planned can be disastrous. Investor may not have kept ready cash to be able to service any mortgage (if any). Pre-market assessment is always important to look into
- Sometimes renovates properties at a small cost to increase their value (usually almost always necessary if looking to flip quicker at higher price)
If the fix and flip option seems daunting for your liking, you may want to consider the buy-to-rent real estate investment option instead. Fairly much better option for real estate markets with low activity from buyers in the short term. Key characteristics of buy-to-rent investors include;
- Long-term investor in real estate in it for long term gains or longer return on investment
- Holds property for a long period and gets rental income from the property
- Buys property in almost any area as long as the neighbourhood has high rental income or is expected to get higher rental incomes in the mid-term
- Doesn’t need to sell the house. The investor can use the rental income to service any mortgage (if any)
- Investor has to keep the property in optimal condition in order to maintain and attract higher rate of occupancy
Which real estate investment do you or would you prefer?