As a Canadian, you might be asking yourself this question. Between flipping homes and renting them, which is more viable?
Well, each plan has its advantages and disadvantages. The optimal option is not just determined by financial objectives. It is also dictated by bearing capacity and investment time.
Understanding House Flipping
Flipping is purchasing a property, doing some upgrades, and then selling the property. The aim of this option is to make a profit.
It is true that it can be very intensive and time-consuming. However, the outcome can be highly effective if well-managed.
Most flippers buy homes in young neighbourhoods or areas with increasing property values. Unfortunately, flipping isn’t for everyone.
This is because it doesn’t just involve providing capital at the beginning. It also entails understanding the real estate market and managing a renovation process.
Understanding House Renting
On the other hand, renting is a long-term investment strategy. It creates a steady cash flow each month as your home increases in value.
Canadian towns with high employment and increasing populations are the best for rental properties. Effective property management enables landlords to accumulate wealth in the long run.
That is because long-term rentals are lucrative investment opportunities in areas, like Sage Hill. This is we have a steady stream of tenants, given the good Sage Hill amenities. These amenities are available for families and young working individuals.
Flipping and Renting Comparison: 3 Important Deciding Factors
When comparing these two, consider the following factors to make the right decision:
1. Comparing Costs and Profits
Flipping and renting both involve assuming risk using money. However, they are structured differently regarding profit attainment. Here’s a quick comparison:
Flipping
- High upfront renovation costs
- Profits depend on market timing
- Short-term capital gains
Renting
- Steady cash flow from tenants
- Long-term property appreciation
- Ongoing maintenance and landlord responsibilities
2. Time and Effort Involved
Flipping seems to demand more in a short-term perspective. You may supervise contractors, search for materials, and face time constraints.
Compared to other investment approaches, renting is not just constant. It also involves tenant management, property repair, and occasional turnover.
Because of that, some landlords hire property managers to avoid the workload. This also results in cutting their profits.
3. Market Conditions Matter
Flipping can be very lucrative, especially when the real estate market is hot. Increased home prices and rapid sales turnover are favourable to house flippers.
However, renting provides more security when markets are slow or the economy is unpredictable. Since the prices of houses in Canada tend to fluctuate, buyers should conduct research carefully.
As a buyer, you should consider local statistics, such as vacancies and rental return. These factors can help you in deciding which strategic orientation best fits the present climate.
In conclusion, the decision between flipping and renting depends on several factors. Your financial needs and risk tolerance are not the only factors determining your investment type. Your willingness to be involved plays a role, too.