For those thinking about investing in real estate and making some quick money, you might have heard about terms like probate sale and house flipping, and more. These are perhaps a few of the easiest ways of making great profits in the real estate business, but it’s easier said than done! This is why, in this post, we’d tell you the difference between house flipping in Texas and renting properties, so that you can figure out what’s best for you.
Introduction to house flipping
It is the process of buying a property, fixing it, improving it, and then selling it again for a profit. The quicker an investor sells the property, the higher the chances of making more profits on the property.
Basically, an investor would have to buy a real estate property at lower than market value, repair it, bring it at par with some of the modern homes, and then put it back on the market at a higher price. So, the more flips you do in a year, the more money you make.
What is house renting?
This is for those people who’re probably looking for a long-term passive investment or are probably new to investing in real estate. Though this doesn’t generate money quickly, it gets you money consistently over a longer duration of time. The best way to make money this way is to buy a rental property, make sure that it’s in good condition, and secure a tenant.
Some rental property owners buy homes with the goal of turning the place into a vacation rental and often list them on travel agency websites/ apps, because that’s more profitable if the property is located at a great location. That said, the success of a vacation rental depends on the location, a good occupancy rate, and the rental price.
Difference between renting and flipping houses in Texas
Perhaps the biggest difference between flipping and renting houses is that the former needs active management, while the latter generates passive income on a monthly basis.
Flipping is considered an active income, one that requires a lot of effort upfront, but generates a substantial profit when done right. However, the process can be tedious and slow. Moreover, you’d need to get the necessary approvals for certain renovation work, all of which takes time.
On the other hand, when you rent out a property, you are usually guaranteed a steady regular income, until of course the tenants leave and you find new tenants.
Advantages of house flipping
- Quick return on investment (ROI): When you take up flipping houses in Texas as a business, you have the potential of earning huge profits in a short span of time. However, to earn the most, you must complete the deal within 3 to 6 months. This way, you are guaranteed of making a great return on investment.
- Less property management tasks: As you don’t end up possessing the property for a long term, you don’t have to deal with the hassles of collecting rents and dealing with difficult tenants. You only need to handle a few property management tasks while buying the property. This includes home renovation, insurance, and marketing.
Advantages of renting houses
- Steady ongoing income: Once you rent out the property, you can usually rely on a steady source of income. Though it will take time, there’d be a time when that sum exceeds the sum you spent on the upkeep of your rental property.
- Increase in property value: The longer you hold a property, the more would be its worth, unless of course the market crashes or the area where the property is located becomes less attractive to people. Real estate properties benefit from inflation, thus your home rental will increase with inflation. So, the longer you keep the property, the more money it generates.
So, when it comes to figuring out which one of the two is the best, it’s not an easy decision. There are many factors worth considering before choosing one as a viable investment option. For those tip-toeing into the industry, we’d recommend a combination of renting and flipping houses in Texas. If you can’t afford to invest in a rental property, we’d advise you to go for flipping a house first, and then invest in a rental property, as rental investors are often allowed to borrow money against their equity. However, if you need a steady inflow of cash, you should consider buying a rental property.
For more info on probate sale, distressed properties, motivated sellers, and flipping houses, feel free to comment below. We’d be happy to help. Also, if you’ve flipped homes in the past, we’d love to know your experience and what would be your recommendation to all who’re new to real estate investments.