Question: Leasing vs Buying Properties for Rental Arbitrage

[Alethia Hines]

I would to know which one of these investment strategies has the best ROI and is this the best way to get started for someone new to REI? I don't really want to start with wholesaling or micro flipping.

[Bryan Hartlen]

@Alethia Hines rental arbitrage is by definition leasing (leasing from a property owner and then sub-leasing at a higher rent). Now a days, RA usually would mean signing a traditional long-term lease with rights to rent the unit out as a short term rental.

In terms of ROI, this will depend on many factors, but in general RA will almost always have the higher ROI as the upfront investment will be lower (you're not buying the property) but you won't benefit from any long-term appreciation that you would gain had you purchased. But there are always exceptions to the rule: eg if you purchased the property using 100% other people's money then your ROI would be infinite.

[Marc Rice]

@Alethia Hines

Its easy to arbitrage/manage for others but the real goal should be to OWN real estate so you can reap the rewards it has to offer such as debt pay down, appreciation, tax benefits, etc

[Basit Siddiqi]

@Alethia Hines

Wholesaling and flipping are not investments - They are a business.

To answer your question, flipping should generate more income. Flipping involves more work and more risk.

[Alethia Hines]

Thank you for clarification. i didn't realize that.