One of the first considerations that single-family Pasco real estate investors make is: flipping or renting? While house-flipping may offer a couple of advantages, many house flippers also deal with significant risks and frequently make big-time sacrifices to get the property ready to sell. Alternatively, buying properties to rent can become one of the simplest methods to grow real wealth without the risk or sacrifice of flipping – as long as it is done correctly. To further appreciate why rentals are a better investment than house flipping, let’s explore the pros and cons of both.
Flipping: The Pros and Cons
For most individuals, flipping houses is a huge investment of money and effort. The reason house flipping draws numerous investors is because of the potential for a substantial, one-time payoff. And there are a couple of house flippers who have earned big money.
However, that awaited payoff accompanies a fairly hefty series 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 generate income after finding, buying, remodeling, and then reselling the property. For several investors, that indicates your income is limited to the number of flips you can do in a year.
Flipping is also naturally volatile, with several possible risks that can quickly eat into your profits. For instance, there’s no guarantee that the bargain property you purchased will appreciate or be sold for as much as you expected 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 shortage of qualified service providers, or unethical or dishonest contractors, including some other concerns, can also make your renovations more expensive, limiting your potential payoff eventually.
Zillow: A Case Study
For a high-profile example of flipping gone wrong, think about the story of Zillow. The corporation chose to venture into the house flipping game by agreeing to buy up homes for sale and then turning around and selling them at a profit. In any case, that was the intended objective. The issue is that Zillow could not sell several 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 gigantic scale.
Investing in Single-Family Rentals
The ideal approach 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 greatest approaches to real, long-term profitability. There are numerous main reasons for this.
Initially, one of the main benefits of investing in rental homes is the possibility to earn short-term cash flows while growing your property values. As your properties appreciate, the reward when you sell keeps pace with inflation over the years.
There are very few investments that can claim the same! Rental properties seem relatively stable in difficult economic circumstances, enabling single-family rental property owners to keep a constant monthly income. There are also numerous tax benefits to owning rental properties, which can add up to large savings over time.
Probably the prime reason some investors avoid single-family rental homes is because of the management they need. While owning rental homes often takes less time and effort than flipping houses, rental homes still need active management to stay profitable.
The good news is that, when executed properly, you can streamline your investment properties and reduce the amount of time they will require of you. When you employ a quality Pasco property management company, you can transfer most day-to-day tasks off your calendar, leaving you free to concentrate on growing your investment portfolio.
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