Of all the possible avenues for involvement in the real estate investing arena, house flipping and longer-term investing are the most popular and common.In recent years, fixing and flipping houses has gained massive popularity, largely driven by the influence of TV shows like Flip This House Still, the tried-and-true (and steady) method of buy-and-hold real estate investing still has many benefits. But how do you decide whether to fix and flip or buy and hold real estate?
First, there are several sound reasons to invest in real estate:
- The returns are more predictable than those for stocks/bonds.
- It provides a hedge against inflation.
- The resulting equity allows for financing other investment opportunities.
- It provides a safe place for capital to reside when other investment avenues are unstable or uncertain
So now let’s look at few of the differences between the two real estate-investing methods in Kansas City.
The Time Factor
One of the most appealing aspects of house flipping is the ability to generate a quick return on investment without keeping an investor’s/lender’s capital tied up for extended periods. The ultimate aim is to renovate and sell the property promptly, allowing for a fast realization of profits. In favorable market conditions, it is possible to earn a substantial profit, such as $30,000, within a few months.
When it comes to real estate investing, the buy-and-hold strategy provides a different approach. This method typically entails a longer waiting period to realize substantial returns on your investment, often spanning several years. Investors employing this strategy primarily rely on market appreciation rather than immediate capital gains. Over time, real estate values generally tend to appreciate, making prolonged property ownership more likely to result in increased value and profitability.
The Risk Factor
When it comes to deciding whether to fix and flip or buy and hold real estate in Kansas City, risk is often the determining factor for many investors. However, it is worth noting that ventures with higher risk potential often yield greater profits in the long run.
Conducting thorough research empowers a real estate investor to reasonably forecast the short-term trajectory of the real estate market in Kansas City. Hence, the fix-and-flip strategy entails minimal risk in this regard. However, the caveat is significant: the majority of properties acquired for fixing and flipping are distressed. Without expertise and experience, there is a risk of encountering challenges beyond your capabilities. This can lead to renovation costs surpassing any expected profits.
Investing in buy-and-hold properties can expose you to market fluctuations, posing a risk if you are compelled to sell during a downturn, potentially resulting in financial loss. Despite this, historical data shows that markets generally appreciate over time, leading to significant wealth creation through this strategy. Moreover, acquiring properties for long-term ownership and renting offers a stable, reliable income stream with lower risk and volatility compared to relying solely on property sales, typical in flipping ventures.
The Hassle Factor
Perhaps you prefer a hassle-free, headache-less approach. Both methods have their own advantages and drawbacks.
With fixing and flipping, you’ll never have to deal with renters, which can be an enormous hassle and headache. But you’ll also have to wade through many more transactions and will have to pay the attendant transactional costs.
Investing in real estate through the buy-and-hold strategy typically involves engaging with tenants, navigating legal complexities, and handling property management duties. This approach requires the ongoing task of attracting and retaining reliable tenants. Nevertheless, it offers a steady income stream without the pressure of quick property turnovers.
Hopefully, if you’re trying to decide whether to fix and flip or buy and hold in Kansas City, the key differences we’ve outlined above will provide valuable insights to help you make a well-informed investment decision that aligns with your financial goals and risk tolerance.