Flip or rent?

[Lindsey Clifton]

Starting out, would you suggest flipping or renting as a first investment? I personally think some properties are more valuable as flips. I live in rural Missouri, college town, with two huge hospitals. So there's market here for both. My thoughts, and I'm posting so I can be corrected: I'm an agent and tenants are a royal pain. I've felt w many. Majority do not take a standard of care. Then there's the list of excuses why rent is late. BUT steady return. Flipping I feel would have much more upfront costs and risks, but quick bang to turn and reinvest. I'm young and just exploring ideas. And learning a ton from BP :) I know there's much more in the pros and cons of each, and that's your cue.....

[John Thedford]

@Lindsey Clifton

Generally speaking you will make a LOT more money using a buy and hold strategy. Imagine having a flip that will net you 20K. That money is ordinary income and taxed at the highest rate. Once that 20K is gone...IT'S GONE.
Now: suppose you hold onto that same property. Suppose it nets you a small amount of $2400 per years. Over ten years, you would have made 24K (there are other factors but I am trying to get an easy example). Lets also suppose you got an average annual appreciation of 2% per year. Lets also consider you get to depreciate 3.6% per year. So, you have appreciation working for you, depreciation working for you, and 24K cash flow over that ten year period. If/when you decide to sell it, you can 1031 out of it and pay -0- taxes. Look how this compares to a one time 20K profit that was taxed in the year you made it at the highest tax rates. Now, imagine have x number of them working for you EVERY YEAR as long as you own them. That IS true wealth building. That will give you financial freedom over time. Flipping is a JOB,...and when you quit your JOB, the money stops. Landlord is a "JOB"...but....it is FAR less time consuming than most jobs and pays handsomely for the time invested. One last thought: if you ever get tired of being a landlord, you can turn it over to a PM company and STILL HAVE INCOME AS LONG AS YOU CARE TO OWN THE PROPERTY! What's NOT to like about buy and hold!!!!:)