One of the primary choices that single-family Smyrna real estate investors make is: flipping or renting? While house-flipping involves a couple of advantages, most house flippers also undertake enormous risks and often make substantial sacrifices to get the property ready to sell. In contrast, buying properties to rent can become one of the safest procedures to grow real wealth without the risk or sacrifice of flipping – as long as it is performed right. To fully understand why rentals are a better investment than house flipping, let’s analyze the pros and cons of both.
Flipping: The Pros and Cons
For numerous investors, flipping houses involves a big investment of labor and money. The reason why house flipping entices a lot of investors is because of the potential for a big, one-time payoff. And there are several house flippers who have gained substantial money.
But that anticipated payoff involves a wide range 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 collect profit after finding, buying, remodeling, and then reselling the property. For most investors, that indicates your income is limited to the number of flips you can do in a year.
Flipping is also integrally volatile, with multiple possible issues that can quickly eat into your profits. For example, there’s no guarantee that the bargain property you bought will appreciate or be worth as much as you desired once it’s ready to sell. Your income is wholly at the mercy of fluctuations in the real estate market. Rising costs of materials, a shortage of qualified service providers, or unethical or dishonest contractors, alongside some other problems, can also make your renovations pricey, decreasing your potential payoff in the future.
Zillow: A Case Study
For a high-profile example of flipping gone wrong, think about the story of Zillow. The corporation intended 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 major goal. The concern 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 great scale.
Investing in Single-Family Rentals
The perfect strategy to decrease 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 paths to real, long-term profitability. There are several big reasons behind this.
Initially, one of the greatest benefits of investing in rental homes is the chance to acquire short-term cash flows while growing your property values. As your properties appreciate, the compensation when you sell keeps pace with inflation over the years.
There are very few investments that can feature the same! Rental properties seem very stable in difficult economic circumstances, enabling single-family rental property owners to keep a continuous monthly income. There are also multiple tax benefits to owning rental properties, which can lead to significant savings over time.
Probably the primary factor why some investors avoid single-family rental homes is because of the management they demand. While owning rental homes usually takes less time and effort than flipping houses, rental homes still need active management to stay profitable.
The good news is that, when handled perfectly, you can streamline your investment properties and reduce the amount of time they will require of you. When you employ a quality Smyrna property management company, you can move most day-to-day tasks off your calendar, enabling you to work on growing your investment portfolio.
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