Fix and Flip vs. Rental Properties.Which Investment Strategy Delivers Better Returns?

Question

Hey BP community!

I’ve been working with a lot of investors who are split between going the fix-and-flip route or holding properties for rental income. Each strategy seems to have its pros and cons, and I’m curious what the community thinks.

Do fix and flips provide faster returns, or do the long-term benefits of rental income make holding onto properties more appealing?

What are the biggest challenges you’ve faced with either strategy?

How do current market conditions influence your decision to flip or hold?

I’d love to hear some insights from the investors here. What’s worked for you, and how do you make the call between flipping or holding?

David Bohn · Answer

This may be an unpopular perspective, but I believe long term hold is going to win out on short term 9 times out of 10.  Several things to consider: 1.  Volatility of the market.  You may make a quick return in a hot market, but the moment that market turns south (which it inevitably will) you will be scrambling to not lose everything you just gained;  2.  Taxes.  Taxes are higher flipping the property.  You don't have the benefit of maximizing cost segregation, long term capital gain, 1031 exchange, refinancing / lending, passive income vs regular income, etc.  3.  Gains in a long term hold can be refinanced and used for another property, but the gain is not taxed.

I originally wanted to flip homes and make quick gains when I started investing.  Fortunately it was during the 2008 crisis and we were forced to hold those homes we bought for like $40k each.  We still have them today and each one is worth closer to $400k.  We were trying to sell each one to make maybe $10k each.  We pulled the equity out strategically and bought more as often as we could.

I would highly recommend long term over short on "most" transactions.

Robin Simon · Answer

I am a huge believer in that the actual Better strategy is being able to pivot and take what the market/numbers take you - i.e. at the start of the project, be open to Both (either a flip OR a BRRRR), whichever models out better for the individual project

Ashish Acharya · Answer

Fix-and-flip offers quicker returns but comes with higher risks, like market fluctuations and renovation costs. Rental properties provide long-term cash flow, appreciation, and tax benefits but require property management. In today's market, rentals might be more appealing due to stability, while flipping depends on timing and efficiency. Your choice should align with your financial goals and market conditions.

Make money via flips and shield the income taxes with rentals. *This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Bob Stevens · Answer

As mentioned, I flipped 500 or so :) We were buying them for all in 20- 35k, 7, 8 9 years ago. Now those same props sell from 110- 180k!! MF were 5- 10k per unit, now 45- 70k. 10 unit I sold for 250k, 8 years ago, just sold for 1 MILL!!!!!! Did I mention I made a MASSIVE mistake LOL

Sean MacDonald · Answer

Wow! How can you manage liquidity to allow for more investing into rental properties?

Bob Stevens · Answer

Of course, fix and flip provides faster returns, HOWEVER in the long term you will do better with rentals. Wealth is built NOT flipped :) BIGGEST mistake of my life was not keeping 50 or so more of the 500 I flipped in my market, MASSIVE mistake that cost me about 4 mill

Drago Stanimirovic · Answer

Hi Sean,

Both fix-and-flip and buy-and-hold strategies have their merits, and choosing between them often depends on your goals, risk tolerance, and market conditions.

Fix-and-flip can provide quicker returns, but it's highly market-dependent and comes with risks like unexpected renovation costs and market fluctuations. It’s a great strategy in a hot market where properties move quickly, but profit margins can shrink in slower or uncertain markets.

On the other hand, buy-and-hold offers long-term wealth-building through appreciation and rental income. It can be less risky over time, and you benefit from cash flow, tax advantages, and equity growth. However, it requires more upfront capital and ongoing management. In today's market, rising interest rates and economic uncertainty might favor holding properties for stable cash flow, while flips could be riskier if buyer demand softens.

For many, a hybrid approach works→ flipping in strong markets and holding rentals for long-term stability. The key is analyzing each deal individually and adapting to changing market conditions.

Would love to hear what’s working for others here!

Best,

Drago

Fix and Flip vs. Rental Properties.Which Investment Strategy Delivers Better Returns?

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