Are you better off flipping or renting in the current housing market?

By the time the real estate market found its peak in 2006 many people were buying and selling homes for a living. Many individuals and investors were buying homes, fixing them up and selling for a tidy profit, a process that is known as flipping. The current real estate market is, without a doubt, a buyer’s market, or Bank Owned Market depending on your location. At this time homes are substantially more affordable than they have been in years, here in The High Desert about 60% less than 2006-07.    Now… on to flipping; is this a good time to flip?

Turning a profit is the key phrase when it comes to flipping, but there is more ways to make a profit than just fixing and selling.  In the real estate market today it is much tougher to find a home that can be flipped for a profit.  Lenders are also throwing some road blocks for certain types of popular first time home buyer loans.  So what’s the secret today?  Many real estate investors, who may have been home flippers a few years ago, are now becoming the landlord. They will purchase a home, fix it up and then rent the home for enough rent to cover the real estate loan and a little extra for taxes, insurance and their pocket. Now this can make sense for many real estate investors and when you take into consideration that you will now have available a 1031 Tax Deferred Exchange to add to your bottom line it get even more palatable to hold for a few years.  It may be anywhere from 3 to 10 years before you can see a sale for more than today’s price but you will have received cash flow and the renter will have paid down the mortgage somewhat by that time.  So…Flipping a house can makes sense by turning a small profit now but by becoming a landlord it may pay out even more in the long run.

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