Of all the possible avenues for involvement in the real estate investing arena, house flipping and longer-term investing are the most popular and common. In recent years, fixing and flipping houses has become hugely popular owing in large part to the influence of TV shows like Flip This House. Still, the tried-and-true (and steady) method of buy-and-hold real estate investing still has many benefits. But how do you determine whether to fix and flip or buy and hold?
First, there are several sound reasons to invest in real estate:
- The returns are more predictable than those for stocks/bonds.
- It provides a hedge against inflation.
- The resulting equity allows for financing other investment opportunities.
- It provides a safe place for capital to reside when other investment avenues are unstable or uncertain
So now let’s look at few of the differences between the two real estate-investing methods in Miami-Fort Lauderdale.
The Time Factor
With the buy-and-hold method, alternatively, it takes far longer for you to see any significant return on investment, often years. Investors in this particular arena more often count on market appreciation rather than capital appreciation. With few exceptions, real estate values increase over the long run. So the longer you hold a property, the greater the likelihood of appreciation and, ultimately, profit.
Undoubtedly, the absolute best aspect of flipping houses is because you don’t have to keep an investor’s/ lender’s capital locked up for substantial periods. You can realize a return on investment in a fairly short time frame– because the goal is to rehab the house and sell it immediately. When conditions are right, you can realize a profit of, say, $30,000 after just a few months.
The Risk Factor
A little research will allow a real estate investor to predict fairly accurately the short-term direction of the real estate market in Miami-Fort Lauderdale So, therein, the fix-and-flip approach carries little risk. But– and this is a big “but”– most houses purchased for the purpose fixing and flipping are distressed properties. Which means if you don’t have practice and know what you’re doing, you could easily go far over your head. And after that rehab expenses could easily exceed any potential profits.
Buy-and-hold properties will be susceptible to market fluctuations, though. And if for whatever reason you are compelled to sell when the market is down, you stand to lose money. But because markets trend upward over longer periods, many fortunes have been made by this approach. Also, buying and holding and afterward renting affords a steady, predictable stream of income with less risk and volatility than having everything hanging on the sale of a property, as holds true with flipping.
When it comes down to deciding whether to fix and flip or buy and hold, the risk is very often the deciding factor for numerous people. Still, ventures with the greatest risk often generate the greatest profit.
The Hassle Factor
Hopefully, if you’re attempting to decide whether to fix and flip or buy and hold in Miami-Fort Lauderdale, the differences we’ve delineated above will help you make the best investment decision.
With fixing and flipping, you’ll never have to cope with renters, which can possibly be an enormous hassle and headache. But you’ll also have to learn many more transactions and will have to pay the necessary transactional costs.
But maybe you just wish to go probably the most hassle-free, headache-less route. Both methods have their benefits and drawbacks here.
Buying and holding frequently entails managing renters, coupled with all the inevitable legal and management issues. And this means you will have the hassle of finding and keeping good tenants. Still, this method will provide you a reliable income without the stress of needing to flip a house within a certain amount of time.