Real estate investing in 2020 brings new challenges and also new opportunities. Many commercial real estate investors are caught in a tight spot due to Covid-19 shutdowns and consumer fears keeping people away from the restaurants, bars, nightclubs, coffee shops, and shopping outlets that pay rent in retail shopping centers.
And residential landlords are not out of the woods either. The government has provided a second national eviction moratorium, preventing landlords from evicting delinquent renters.
That said, real estate investing is still a great way to invest and build wealth. You know this, which is why you may be weighing whether doing fix-and-flip deals are better than long-term rental investing in 2020.
The question of whether you should focus on quick flips or rental property investing is a super personal decision. You really need to take a closer look at your personal finances, goals, and long-term plans to determine what you should do.
We’ll take a look at several key benefit areas of real estate investing and how quick flips and rental properties are impacted in these areas.
Active vs. Passive
To start, you have to decide whether you have time to be active or need to remain passive in your real estate activities. If you want to act more like a construction contractor, running a full-time construction business, then doing fix-and-flips may be right up your alley.
On the other hand, if you have a full-time career or business that you love and don’t plan to leave, but you still want to invest in real estate, then landlording and hiring a property management company in Baltimore gives you a passive path to investing.
Profits and Cashflow
If you need a big cash injection, then fix-and-flipping properties is the best strategy for you. After all, if you buy the property low, make the important changes that add tons of value without costing a fortune, and then sell the property at the right price, can yield profits of $20,000 - $40,000 or more – per deal.
So, if it is big profits that you’re after, then there’s no question that you should do a fix-and-flip deal over a rental property.
On the other hand, if you make a good income and you are really looking at real estate like a true investment – that yields positive cashflow and appreciation – then you should focus on buying rental property.
The best tax benefits come with owning rental properties. You can write off expenses associated with the property as well as take depreciation -wear and tear expenses - over a period of ownership time.
Properties that are bought and sold within a year for a higher price than it was purchased for are subject to paying capital gains taxes. Capital gains taxes are applied since the quick flip is viewed as income – making it the highest level of taxation possible.
If you really need a cash injection, then doing a quick flip is the obvious choice because you can generate huge profits in a short amount of time with this strategy. However, if you are looking to build long-term wealth through real estate investing and you don’t need a huge ROI in the short run, then buying and renting out properties is the best choice.
Still, landlording does come with its own headaches. The great news is that these headaches can easily be alleviated with the help of a solid property management company in Baltimore.
Learn more and contact Utz Property Management for help today. Simply call us at 410.343.4867.