Flipping vs Landlording, Which One is For You?

Building a real estate investment portfolio can be quite a rewarding experience, but there are some things to consider before you jump out of the gate. Understanding what type of investor you are or want to be is the first thing to consider. Being educated on the duties required to be an investor is another. Two of the most popular real estate investing methods are flipping and landlording.

Flipping

Flipping is a jump-in, jump-out type of investment. With this type of investing, investors purchase a property, complete any necessary rehab and then resell the property for a profit. Some investors are only interested in making money as an investor and don’t want to be involved with the duties of being a landlord. With the housing market still in a recovery process, many investors are able to purchase properties at pennies on the dollar, pay the cost of rehabbing and then put the property on the market, oftentimes making a great profit.

There are however things to watch for when deciding to flip a property which can include;

• A slow market – the same market that afforded the investor the opportunity to buy properties dirt cheap is the same market that can make selling a property after rehab a long and tedious process
• Taxes – proceeds from investment properties are considered as income when operating as a sole proprietor. Setting up the proper investment company is encouraged when deciding to invest in real estate.

The bonuses when structured properly can definitely outweigh the risks and include;

• Making a significant profit on wise investments
• Investing without long term dedication to handling the property as a rental

Landlording

Some investors love being a landlord and others dislike it. Personality has a lot to do with landlording as well as building and operating the property management portion of being a real estate investor. After a landlord has purchased and rehabbed a property instead of putting it on the market for resell, they put it on the rental market. In this case the investor does not see a quick return on the investment but rather a long term residual income.

The things to watch for when landlording can include;

• Problems with tenants if not screened properly
• Lengthy processes to evict and the possibility of more repairs when tenants vacate the property.

Whichever method one selects as a real estate investor it is recommended that due diligence is performed prior to getting started.