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Buy-To-Let vs Property Flipping: How Should You Invest In Property?

  • March 7, 2022

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There are two main ways to invest in property: buy-to-let and property flipping. Both can be effective ways to make money, but both involve very different approaches and goals.

A buy-to-let investment involves renting out a property to tenants. When done successfully, the tenants’ rent helps cover mortgage payments and repair costs while also making you a small return on top each month.

Flipping property meanwhile involves buying property at a low price and selling it soon after for a higher price. Successfully flipping a property typically involves repairing or renovating a property, increasing the value as much as possible while spending as little as possible on repairs/renovation costs.

This post explains why you may want to consider each investment strategy, and which one you should ultimately choose. 

Why become a landlord?

Renting out property as a landlord can be a great long-term investment. It can also serve as a passive continuous income - you’ll be having money coming in each month from your property. Many retired people use this income to top up their pension. You typically cannot live off this income alone, unless you’re renting out lots of properties. 

As a landlord, you will need to make sure that the property is constantly filled with tenants and that these tenants are paying rent. It’s also your legal obligation (unless you otherwise state it in a contract) to pay for all repairs as a result of wear and tear. You need to be able to keep on top of these duties for as long as you plan to rent out the property. Hiring a property investment manager can free up these responsibilities, which could be ideal if you’re looking for a stress-free investment. However, you will need to be prepared to pay extra fees for this service.

Why become a property flipper?

Flipping property is much more of a short-term investment. While a buy-to-let investment can make you a return of thousands of dollars over a couple decades, you can make a return of thousands of dollars within a few months by flipping a property. Some people are able to flip several properties per year and turn this into a sole income. However, that isn’t possible - property flipping may make you more money faster but it’s riskier and less easy to predict profit. 

In most cases, flipping property tends to be a lot more hands-on. It is possible to outsource all the repair and renovation work to contractors, however this will cost you more. The aim of property flipping is to add as much value while spending as little as possible on improvements - being able to do some repair/renovation work yourself will save you money in contractor fees. Take this into consideration before buying a property to flip.

Which is the best option for you?

Becoming a landlord is great for those looking to make a steady return over a long period. There can be obstacles along the way such as tenants not paying rent or emergency repairs, however you can generally reduce these problems by screening tenants and buying a property that’s in good condition.  Hiring a property manager can also take away a lot of the stress.

Flipping property is generally better for those looking to make a lot more money more quickly. It is typically a riskier and less predictable investment - you should be careful treating it as a sole source of income, instead treating it as a supplementary income. Being DIY savvy and having time to make improvements yourself could help you to increase your potential return. 

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