Real estate investors have two options when it comes to property: sell or rent. Selling is a short-term investment strategy, while renting is a long-term investment strategy. Ultimately, to make the decision, several factors are at play. Each option has the opportunity to make a nice return for you, but in some markets and locations, one may be more advantageous than the other.
If you are in a market that is low on supply, selling may be the better option. The thing to consider with short-term investing like this is what can the property bring once it’s renovated. You’ll be able to qualify what this number may be based on comps. If the neighborhood is seeing a lot of successful fix and flips, then you may be able to have a solid return in a short amount of time.
Short-term investing is also more convenient if you don’t want to act as the property manager and landlord. Over time with renting, you’ll have to keep putting money in the property for regular maintenance and wear and tear.
If you need money fast to invest in another property or for a big purchase, short-term investing is probably the best option for you. A short-term real estate investment approach is ideal for areas with stable or insignificant projected increases in value.
If you appreciate residual income, then long-term investing may be for you. If your property stands to continue to appreciate, then renting is a good strategy. This means that you’ll get a defined amount of income every month. Then should you opt to sell in the future, the value of the property will have increased over time.
So, we’ve looked at the basics of short-term investing vs. long-term investing and how each approach can net you income. Two of the most important considerations in the buy vs. rent argument are the location and population. The location is key because if it’s not a neighborhood that is seeing appreciation then flipping a property may not net you any offers. However, you may still have interested renters.
In a sought-after neighborhood, people are competing to live there, so if you’re working on a fix and flip you could see a very high return.
Population is also critical. You need to determine if people are moving into or out of the location of your property. The more influx of population, the more you can rent the property for because there is little supply compared to demand.
How will you approach investing? When you are crafting your strategy, be sure to pay attention to all considerations while also considering how much energy and time you want to put into a property. This will help you decide to rent or sell.
If you want more information renting vs. selling, download our white paper.