Residential property investors are experiencing upward pressure as people look for new places to call home. This has rekindled the age-old question of whether it is more profitable to sell properties by flipping them or generating income by renting out residential properties.
The Advantages of Renting a Residential Property
Residential properties have the potential for long-term gains for investors who want to rent them out to tenants. Monthly income generated from rentals can easily exceed the capital used for purchasing and renovating the property, and if the property is already clear, then any income generated is fully bankable. Residential property investors should pay attention to market trends and comps to figure out their pricing, which can influence whether a single-family rental stays as-is, or if it would be wiser to convert the home into multiple units.
Single-Family Vs. Multifamily
If a single-family rental can bring in a steady stream of income, then a multifamily can multiply that revenue. Additionally, renting out multiple units – or offering multiple single-family residences – helps to create a financial safety net for property investors. A single-family property is not generating income when there are no tenants. On the other hand, when there are multiple rental properties or units in your portfolio, the occupied units will continue to bring in income when tenants in other units move out, which is a financially sound strategy.
The Advantages of Selling Investment Properties
The number of people looking to purchase homes is growing. Families are expanding and people are looking to leave congested cities. The COVID-19 pandemic has changed the way people work, and with so many jobs shifting to the digital space, a lot of employees no longer have to worry about commuting or living near their companies. As a result, residential property investors are buying homes, renovating them, and flipping them for a profit. While the income generated from selling properties is not as steady as rent from tenants, the amount of revenue netted from flipping properties is much higher, so investors can build up capital reserves between transactions.
Should You Rent or Sell?
The answer to the big question comes down to personal preference. Some residential property investors prefer the regular income generated from rental properties. Others have the experience to renovate and flip properties, even though there are occasional gaps between sales. Then there are investors who walk both paths, flipping properties and converting some into rentals if market prices for selling are not ideal. Regardless of which option works best for you, there are many opportunities for both renting and selling properties.
At The Capital Rams, we specialize in real estate financing for residential property investors. Contact our offices today to learn more.