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Flipping Houses: Is It Better to Hold?

     Never underestimate the power you gain when you purchase a home. Not only does it signify personal independence, but also financial savvy. Every cent you invest into the property will be returned, as long as the housing market stays strong. 

     Holding onto your property for a long period of time is one smart way to build your investment. Those who operate rental properties will probably tell you about all the time and money you’ll have to sink in before cashing out. So, is it better to hold or flip? Let’s consider the pros and cons of both.

House Flipping

    Thanks in part to reality TV shows, everyone is looking to buy old and foreclosed homes with the purpose of renovating them. This field attracts the “do-it-yourself” crowd, but contractors can be hired to handle complex tasks.

Pros:

     Part of the excitement in flipping will come from tallying up the value of each improvement made. The equity on your home will be easy to gauge.

     Flippers tend to work with a property for six months. After that, they can sell it quickly to avoid any drastic price drops in your market.

     Unlike rentals, your obligations to the property end once you sell it to the new owners. 

Cons:

     Transaction costs will take a toll on whatever property you end buying or selling. Quick turnarounds mean everything to flippers. If your income fluctuates too fast, it could cause your tax bills to boost.

     All of the reality shows and books on house flipping may not prepare you for the unexpected challenges ahead. A depreciated home can take more than six months of work to become marketable again. If you’re looking at homes for sale in Colorado Springs or a hot market, then these are important considerations to keep in mind. 

     Do not go into any house flipping situation expecting to find a seller as soon as you finish. You may have to hold onto the property longer if the market declines.  

Buying-and-Holding

     House flipping may only grant you a single lump sum payment. Buying-and-holding promises a higher payout that is equal to (or greater than) when you first bought the house. Those who operate rental homes are buyers-and-holders.

Pros:

     Real estate values increase over time. The longer you care for a home, the more your equity will appreciate.

     Landlords who own multiple properties can enjoy a steady cash flow from each. This is secured by hosting good tenants who are timely on rental payments and create no need for maintenance.

     Flippers need a steady chain of sales to make profit while holders can take their time. As long as you don’t need emergency funds, you can afford to wait out market downturns.

Cons:

     Being landlord means working day and night to satisfy your paying tenants. Keeping track of all your tenants’ needs will require hiring a private management service.

     The good tenants are few, but the bad ones are many. Even after eviction, you’ll still have to cover any lingering damages

     A home that goes vacant for three months or more will cost you. With no occupants, you’ll essentially be paying to own multiple homes.
@2019, copyright Lisa Ehrman