Property Flip or Hold – Flip vs Hold

March 7, 2017

Property Flip or Hold - Flip vs Hold

When purchasing a home for investment with the intent to Flip or Hold you need to consider the Value Analysis of the property. In Real Estate Investment you make your profit when you purchase. We are going to look at the Hold vs Rent Analysis. Yep, Flip property for a Quick Profit or Rent for passive income which I believe is great for long term investment.

In previous posts we looked at Flip Analysis and Hold Analysis. We are going to take a look at our calculation analysis in order to make an educated decision wether we should Flip or Hold.

Flip Analysis

  • Profit at $38,250 if are able to Flip instantly without holding time, somewhat unlikely but you never know.
  • We have a range of holding up to 12 months with a descending Profit range from $37,910 to $34,170. An average Flip might take 4 to 6 months to actually sell and close, assuming we priced it correctly.
  • To be conservative let’s use the 6 months Profit of $36,210.

Rent Analysis

  • In order to make the same Profit amount as the Flip of $36,210 we see that we fall in the range between 5 to 15 years. It looks like it would take around 8 years of Renting in order to make the same profit as the Flip.

Summary

Flip Pros – Instant cash profit.
Flip Cons – Big tax hit.

Rent Pros – Long term cashflow, better tax deductions, appreciation of property value, tenant rent goes toward paying down mortgage and eventually property will be free and clear.
Rent Cons – Take longer to match Flip profit.

 

When trying to make a decision if we should Flip or Hold we need to consider above points. I personally take advantage of both Flip and Hold depending on my situation. Flipping a few homes can give you enough cash to purchase more homes and Rent them. Some of my deals I am able to use the cash to purchase properties at a better price (sometimes) then Rent them and after 6 months or so I can obtain a Mortgage to take cash out (income tax free since it’s a loan, always check with your accountant). Then I can take this new cash and purchase more homes.

 

Property Flip or Hold

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