House flipping may look like an exciting game, at least at first glance, as it is attractively presented in many of the house-flipping shows on TV. But it is serious business. According to ATTOM, a leading provider of property and real estate data, 407,417 single-family homes and condos were flipped in the U.S. in 2022. No doubt, house flipping requires a combination of passion, knowledge, strategy, hard work, good property selection, and good financing. A key question for house flippers is whether to flip and sell or to flip and rent. 

Wealth Building Strategies 

There are many ways to build wealth including stocks, bonds, and real estate. Of these, real estate has been proven to generate more predictable returns than stocks and bonds. The equity generated by real estate can also create additional funds for other types of investments. Real estate is an excellent hedge against inflation since real estate values generally rise faster than the inflation rate. Plus, possible cash flow can be generated. Getting into real estate can involve buying properties of various types as well as flipping houses. 

Flip and Sell versus Flip and Rent 

When a house is purchased to flip, a key decision to be made is whether to flip and sell or to flip and rent it out. Flippers may decide to flip and sell so they can move on to the next opportunity. Or the choice may be to flip and rent. Flipping and selling should produce immediate income while flipping and renting will produce ongoing income. Some real estate investors do both. 

Flip and SellThe Pros and Cons 

The first pro of flipping to sell is that capital is not tied up long-term in the property. Typically, a property can be flipped and sold in six months. The faster the project can be completed, the higher the return on investment will be. Of course, there may be some challenges that may extend the timeframe of the flip. 

The second pro is that no long-term property management is required. A home is fixed, flipped, and sold and the flipper can move on to the next project. 

The first con is that income from flipping can be inconsistent. Income will depend on the cost of the property, the cost of renovations, the selling price, and the timing of the sale. 

The second con is that taxes will apply to capital gains. 

Flip and Rent—The Pros and Cons 

The first pro of flipping to rent is that ongoing monthly income can be generated by the rental, and this income can be generated for a long time. 

The second pro is that your property will increase in value over time. Thus, if you eventually decide to sell it, you can realize a substantial gain. 

The third pro is that rental property offers valuable tax incentives while flipping and selling do not. Rental property owners can take tax deductions for repairs, maintenance, the cost of property management, and property depreciation.  

The first con is that there is a risk of vacancy. That means that a property can generate no income for some period while the mortgage and other costs continue. 

The second con is that rental properties require supervision and effort to keep the property occupied. 

The third con is the possibility of legal issues that can come with being a landlord. 

The Bottom Line 

Flip and sell and flip and rent can both be effective wealth-building strategies. Making a decision between these two options depends on three factors: 

  1. How fast an investor wishes to receive income from a sale versus the benefit of long-term income from a rental. 
  2. How much capital the investor has available to deploy. 
  3. How much appetite an investor has for the demands of property management.  

Get Expert Alternative Financing Assistance 

Contact Multiple Financial Solutions, with offices in Jacksonville, FL, and Houston, TX. We offer a portfolio of alternative funding solutions for investors that can’t get funding from banks. We focus on enterprises that have been active for 2+ years and are looking to grow to the next level. Contact us to explore your options.