Most often, in the real estate industry, the investors invest in two types of properties that are – Fix and Flip and Buy and Hold based on their likelihood or financial stability. Both types of real estate investment have their own pros and cons, which puzzle the novice real estate buyers as to invest in which and which not.
Moreover, there is no perfect answer that illustrates which real estate investment is the perfect fit for which type of buyers. That’s embarrassing, but there is a list of questions which help the buyers in deciding which is the better option for them.
Ask yourself and get the answer of the enlisted questions to figure out what works best for you:
How early you want to make the profit?
With fix and flip, you are more likely to get the returns in a tenure of less than six months, but with buy and hold, it will be a long haul. Although holding the property for years bring high returns, but that comes with a long wait. If you want to make money quickly, go with house flipping, else prefer to buy and hold.
How much funds do you have?
Well, both types of investments easily get financed by house flipping lenders or hard money lenders. With house flipping, the buyers need more cash in hand to fix the property, pay contractor fees, and other utility bills. The buy and hold also come up with some vacancies at times, so you have to be ready to pay off those vacancies with your savings. Based on personal savings or capital you have, choose any one of the options.
What’s the market situation?
The real estate market won’t fluctuate too often. The change is observed over the course of months. The house flipping will not get affected with the market condition as the property is fixed and flipped in a matter of months.
With buy and hold, the buyer has to be cautious. They need to research on the real estate trends in the area in which they want to buy the property and check in what direction the property values are heading. If there are less chances of getting the market up, don’t invest in the property.
How far away do you live from the property?
The house flippers are not much concerned with distance as they have to visit the property on a regular basis, but for a short duration, so they don’t need to give much thought to it. In buy and hold, it’s a matter of years and to better manage the property the regular visits are must. In order to not regret later, make certain the property is not too far away from your residential place.
Which tax bracket do you come in?
The house flippers if come in high-income tax slab, then it will probably haunt them as they will end up paying more taxes as opposed to buy and hold property buyers. Make certain a large part of your profit you will get end up paying as a tax. Plan your investments accordingly.
Conclusion
There are a lot of hard money lenders, private money lenders or fix and flip lenders in Los Angeles that are encouraging the buyers to invest in a fix and flip or buy and hold properties with easy approval and funding. But, the question on what type of property the buyers want to do more, muddies the water. Depending on the answers the buyer gets from the above questions, they can roll the investment ball over. Good luck!