Flip or Lease? Choosing The Right Strategy To Monetize Your Property

Two of the most common ways to monetize a property investment are by leasing or flipping. Both have promising benefits to offer, but there are also important considerations to weigh before choosing which strategy to go with. 

Here is a comparative overview to help you with your decision. 

Flip Strategy 

Property flipping is an investment strategy wherein you will buy an existing property with the intention of renovating it to be resold at a higher price. 

Buy. Renovate. Sell. It’s a fairly simple process. 

Flipping is a practice ideal for investors looking for a shorter turnaround period and does not intend to keep ownership of the property. 

What are the advantages of Flipping? 

Faster turnaround

If executed well, you can get a hefty profit in a relatively short period. Experienced flippers can start earning between 6 to 12 months on average. 

No need for maintenance and repairs 

Repairs and maintenance are a lot of work and often costly. But since the property is sold after renovation, flipping will leave you free from this responsibility. 

Does not involve dealing with tenants 

There is no need to look for renters, collect the monthly rent, or handle complaints. 

What do you have to consider if you choose to flip a property?  

Requires big capital 

Aside from the cost of actually buying a property, you need to take into account the funds needed to renovate it. 

Choosing the right property to flip 

This is arguably the most crucial aspect of the process and can dictate the success or failure of the entire endeavor. 

Choosing the property to invest in requires research and substantial knowledge of the local real estate market. Ideally, you should only flip a property in a location where there is an existing demand in property sales.

This is something that the Assets for Life community can help you with (Click here to join). 

 A reliable contractor / construction team 

Flipping is based on the concept of turning a low-value property into a high-value property. But to make a revenue, this has to be accomplished with reasonable expenditure. 

Therefore, you will need a contractor who can improve the property and at the same time, stay within budget. 

Lease / Rent to Rent Strategy 

Rent-to-rent strategy means letting someone else occupy your property in exchange for a fee that is paid continuously on a timely basis. 

Unlike flipping, this strategy allows you to keep the ownership of the property. Instead of a one-time big-time profit, you generate income on a more gradual and long-term flow. 

What are the advantages of Rent to Rent / Leasing?  

A steady, continuous income 

Possibly the biggest advantage of this strategy is that it will generate passive income – a continuous cash flow that you do not need to work for. It is basically your property making money for you through the rental fee.  

Maintaining ownership of the property 

Though not guaranteed, properties tend to increase in value over time. Since you maintain ownership, you may benefit from this and resell or even flip the property at a later time. 

Tax advantages 

Selling a property, as with the case of flipping, would expectingly cost high tax fees. But though owning the property still involves taxes, it is relatively lower than with other asset types. Moreover, leasing the property will entitle you to tax deductions including operational expenses, repairs and maintenance, and depreciation. 

What do you have to consider if you choose to lease a property? 

Managing tenants 

Instead of a buyer, you will need to find renters to occupy your property. Being a landlord will require posting ads, addressing tenant complaints, and collecting payments. 

Conduct regular maintenance 

Though the concept of leasing is to let your property generate income for you, there is still some work involved. You have to do regular maintenance and fix damages. A portion of your income should be allocated for this. 

The property will be on hold until your lease contract ends 

Leasing your property will mean committing to a contract. Until the agreed rental period concludes, you will not be able to sell your property. 

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