Pros & Cons: Flipping vs Renting

[Taylor Pariseau]

Hi all! Very excited to join and learn all that I can here. I am an upstate NY software engineer looking for a way out of selling my time. I was convinced of Real Estate Investing as the best alternative over a year ago and am finally ready to get started.

For my first post, I'd like to poll the masses. Obviously, there is no "correct" answer here, but I figure this is the best place to get a healthy array of opinions on the topic!

In your personal opinion, which is better - flipping or renting?
- What are your Pros and Cons of each?
- Does your answer change based on locale?
- If you are 100% on one side of this, please provide your personal reasons!
- If you have successfully done both, please provide some examples of what you liked and didn't like!

Thank you in advance! Looking forward to reading your responses. Also, any other tips/tricks/suggestions for someone getting started are extremely appreciated. Time for me to read the free E-Book! :) Thanks again, all.

[Nick Baldo]

Hi @Taylor Pariseau, 

Great question! I have experience with both flipping and rental properties. They each certainly have their pros and cons and are dependent on many variables. Here is my opinion below; 

 - What are your Pros and Cons of each?

• Flipping
  
  • Pros
    • Larger short term profit/ cashflow
    • Potential for no money down deals (with private lending)
    • If you have a bad deal, you can get out and move on.
  • Cons
    • You are always dependent on your next deal (No consistent/ reliable stream of income)
    • Much more difficult to find good deals
    • Certainly not "passive". Managing rehab projects is very complex. 
    • Higher risk
    • Requires creative and high cost financing.
• Rental Properties
  • Pros
    • Long term, potentially passive income
    • Reliable source of income
    • Easier to find good deals
    • More resources available. Certainly the more popular strategy
    • Easier to find conventional financing (The deals are safer for banks)
  • Cons
    • Can take awhile to build up the cashflow to sustain itself
    • Typically requires some form of personal cash contribution

- Does your answer change based on locale? - Yes! Our business began with a focus on flipping properties in the Buffalo, NY area. While we had success, it was difficult to establish a consistent flow of deals with high profit potential. In markets where the median selling price is relatively low, there is generally a smaller window for flipping profit. On the contrary, these markets are usually attractive for rental properties as they have lower barriers to entry. Our location caused us to shift our focus from flipping to building a portfolio of long-term rental properties.

- If you are 100% on one side of this, please provide your personal reasons! - We still do both! We use the rental business as the bedrock of the business; slowly and steadily increasing our portfolio. We treat flips as supplemental or "bonus" income. Still love both...but rentals are the focus.
- If you have successfully done both, please provide some examples of what you liked and didn't like! Love the predictability of rental incomes. Flips are great when you hit a nice profit. However, listing a flip for sale can be extremely stressful. You are paying high interest to your private lender with no guarantee that you will break even. Rentals are nice because they allow us to establish a relationship with conventional banks. This serves our goals of long term portfolio growth. 

Quick responses...but let me know if you would like me to elaborate in any areas!