There are a wide variety of ways to invest in real estate; one can make, or lose, money in any of these options. To be successful in real estate investing, it’s critical that you identify what skills you have and your tolerance for risk. Then choose a type of investment that works for you and repeat that model.
Investors can make great profits by both flipping properties as well as holding them as rentals. The difference really boils down to a few considerations:
First, what kind of income are you seeking? Active or Passive?
Actively buying, fixing and flipping properties is quick cash that requires careful timing and effort. Rental properties, on the other hand, offer passive long-term income which accumulates over time. Additionally, property value increases during this time you own the rental property. The downside is that one must invest time in property maintenance and tenant management or the cost of hiring a good property management company to do it for you.
The second concern is risk.
Flipping a property is not traditional investing where one buys and holds an investment. Flipping is really speculation. When buying a flipper, one must carefully gauge the cost of refurbishment, remodeling and the cost of the holding time into the price valuation, then carefully market the home and realize the profit. Any number of variances can go wrong which could cause the value to drop and profits to reduce or even disappear, such as a delay in remodeling or a slow real estate market.
The third consideration are the trends in the real estate market.
If you’re flipping properties then you need to consider the current real estate market trends and whether the market is rising or falling. With a longer term rental weighing current rental rates with the carrying costs of the investment property is essential to ensure you are making money from your rental.
Real estate investing can bring nice profits. Determining what’s best for you and your talents is important in choosing the best option for your financial goals.
For more information on whether a renting or flipping option is better for reaching your financial goals and how the real estate market trends in the Greater Denver Area, including Arvada, Lakewood, Golden, and Wheat Ridge, will impact your real estate investment strategy contact us to find out more.