Buy and hold vs flipping a property pros and cons
Buy and hold vs flipping what should you do?
Today I want to talk to you about whether you should be buying properties to flip, or whether you should be buying properties to hold and rent. I am personally a big fan of buy and hold rentals. So I'm going to open this video by admitting that I'm a bit biased. But here's the thing, a lot of people that I talked to who are thinking about investing in real estate, they think they're going to be able to find a home to flip, that just means paint and carpet, and then you'll be able to make a $50,000 profit. If those deals existed, everyone would do it. Okay, flipping is a lot more complicated than that. And virtually every flip I've seen needs a lot more than paint and carpet. Oftentimes, flippers are putting in all new flooring, new cabinets, new countertops, new appliances, new light fixtures, scraping popcorn ceiling, doing all of these things to it. And then when they turn around to sell it, they're paying a ton of fee, you know, realtor fees, title fees, escrow fees. And then the kicker, the real kicker is the capital gains tax unless they're gonna do a 1031 exchange, which can be complicated when you're flipping properties because you've got to quickly move it into another property. And that's a whole nother video, not getting into 1031 exchanges right now.
But oftentimes, if you're flipping a home, you're also going to pay capital gains tax on your gain. Flipping in the Phoenix market is extremely competitive, there's a lot of people who are doing it, and it can be hard to find the right deal. But ultimately, the biggest reason why I love flipping is that I'm working with a client. If they're in a situation where they absolutely need to sell, they need to sell fast, they can't afford to put any money into the house, that and the home is really beat up. And it's not going to sell to a normal buyer than I can absolutely understand why they need to sell it to a cash investor who's going to remodel the home. But I have found that most of my clients do have the ability to put a little bit of time or a little bit of money into the property if it's going to help them make an extra 20 or $30,000 on the home.
So as a realtor, I'm really committed to helping my clients make that extra money, rather than helping another investor make that money. Now with buy and hold properties, you don't necessarily need to look for the deal of the century, the deal of the century that we have right now is that interest rates are in the threes, okay? That's the only deal of the century that you need to be able to buy rental properties, you can buy these homes, you can get instant cash flow on them, the values are rising, rents are rising. Sometimes I work with investors who are a little disappointed when they see, okay, I'm gonna buy this house, I'm gonna put all this money down and I'm really only going to be left after paying vacancy and management and maintenance. Maybe I'm only left with two or $300 a month. But that's the first year long term. Like I know, there's dips, you know, we talk about 2008 all the time, but long term, real estate never goes down. So I like buying that property with the intention of holding it until I retire and I might not hold that exact property. It's possible 1031 Exchange into different properties that produce better cash flow. But my intention is to never cash out of my investment properties and to live on the residuals. I'm all about the residuals I would rather get $500 a month for the rest of my life than a chunk of 10 or $20,000 Right now.