One of the initial decisions many single-family Turlock real estate investors make is: flipping or renting? While there are certain advantages to house-flipping, most house flippers also take on significant risks and often make significant sacrifices to get the property ready to sell. On the other hand, buying properties to rent can become one of the easiest ways to grow real wealth without the risk or sacrifice of flipping – as long as it is done properly. Let’s look at the pros and cons of each to see why rentals are a better investment than house flipping.
Flipping: The Pros and Cons
For most individuals, flipping houses is a big investment of money and time. The reason house flipping entices many investors is because of the potential for a big, one-time payoff. And there are a few house flippers who have made good money.
But that hoped-for payoff comes with a pretty big 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 make money after finding, buying, remodeling, and then reselling the property. For multiple investors, that means your income is limited to the number of flips you can do in a year.
Flipping is also inherently volatile, with several possible problems that can quickly eat into your profits. For illustration, there’s no guarantee that the bargain property you acquired will appreciate or be valued as much as you planned once it’s ready to sell. Your income is entirely at the mercy of fluctuations in the real estate market. Rising costs of materials, a scarcity of qualified service providers, or unethical or dishonest contractors, among other issues, may all increase the cost of your renovations, diminishing your potential payoff sooner or later.
Zillow: A Case Study
For a high-profile example of flipping gone wrong, read the story of Zillow. The corporation decided to join 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 initial intention. The issue is that Zillow could not sell many 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 greatest strategy to prevent 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 easiest approaches to real, long-term profitability. This is due to a number of significant factors.
First, one of the major benefits of investing in rental homes is the ability to generate short-term cash flows while growing your property values. As your properties appreciate, the payoff when you sell keeps pace with inflation over the years.
There are very few investments that can state just that! Rental properties are often quite stable in difficult economic circumstances, helping single-family rental property owners to establish a stable monthly income. There are also many tax benefits to owning rental properties, which can add up to big savings over time.
Perhaps the biggest reason some investors avoid single-family rental homes is because of the management they require. While owning rental homes typically takes less time and effort than flipping houses, rental homes still need active management to stay profitable.
The good news is that, when handled correctly, you can streamline your investment properties and reduce the amount of time they will require of you. When you partner with a quality Turlock property management company, you can take most day-to-day tasks off your calendar, allowing you to concentrate on growing your investment portfolio.
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