If you’re interested in investing in real estate, you have most likely considered flipping houses versus renting to tenants – which will offer the best return on your investment? Let me guide you through the pros and cons. 

What is house flipping? 

Flipping is when someone buys a property, makes improvements throughout the home and sells it for a profit. The quicker you can sell the house, the better chance you have to make more money. When it comes to flipping houses, there are benefits and drawbacks like any other business model. 

Pros:

• It is profitable. The earnings you can make from selling a flipped home guarantees a quick return on your investment. This means you get your money back faster than in other business endeavors. 
• No property management. You won’t have to worry about finding renters and dealing with issues like broken appliances or repairs. Your only concern will be finding people to purchase the house once you’re ready to put it on the market. 
• You can turn it into a full-time career. Consistency and networking can help make your house flipping side hustle into a full-time gig. The average pay for a home flipper in the U.S. is $78,000 and can go up $127,000, depending on the area and square footage of the home. There is no limit on how much you can earn on a successful flip. 

Cons:

• A house flip is bound to have additional expenses. It can end up being a money pit, if you do not budget correctly. One of the mistakes you must avoid is not inspecting a property thoroughly before purchasing the house to renovate. Unexpected repairs will increase the time and effort needed to complete the job. 
• You could have to pay high holding costs such as property taxes, insurance and maintenance and utility costs. Every homeowner, including house flippers, has to pay these costs on a property. The longer it takes to complete the flip, the higher your holding costs. These costs can create a financial burden when paired with unexpected repairs that can delay the sale. 
• You may have to pay higher taxes. Repairs and renovations will increase the market value on the home. The downside is that it could boost your property tax bill. You will also have to pay a capital gains tax on any profits you make on the flip. 

What is renting?

Owning a property is a longer term investment. To get involved in renting, you’d first buy a home, ensure it is in good condition and lease it to a tenant for a monthly fee. Rental properties are a great investment with several benefits, but it can also have drawbacks like any other business venture. 

Pros:

• You will receive a passive income. Rental properties provide ongoing income and don’t require a lot of work. 
• Over time, your rental property could increase in value and have a higher appreciation. There’s a possibility that it will lead to more money, if you decide to sell in the future. 
• Renting houses allows you to have tax benefits. You can deduct a lot of expenses such as property taxes, insurance and mortgage interest. This allows you to have more profit for yourself. 

Cons:

• One of the biggest drawbacks of renting properties is dealing with maintenance costs and property management. This can be anything from simple maintenance to major repairs. If something goes wrong, it is your job to fix it. 
• Vacancy risks are a huge concern when renting out properties. It can take time finding tenants who qualify for your properties. You can’t earn money while waiting for potential tenants to come by. 

Whether you decide to start flipping houses or purchase a home to rent, you should always consider the pros and cons and be prepared to cover any expenses that may come your way. If you are looking for your next rental property or house to flip in Sarasota, contact me at 941-225-1500 or at AmyChapman@michaelsaunders.com. I’m happy to help!