Kevin AmolschWhat’s the Better Real Estate Investment in Today’s Market?
I recently recorded a video for our YouTube channel about the economic conditions we’re currently experiencing and the best real estate investing strategies I see as an investor. That episode isn’t live yet, but it will be soon. After filming it, I started thinking about one of the most common questions I get from new real estate investors: Is it better to keep my fixer-upper as a long-term rental or fix and flip for profits now? Although the economy certainly plays a role in this decision, there’s a lot more to consider than the market alone.
Fix and Flip Investing: High Risk, High Reward
Among the riskiest ways to invest in real estate—at least in my opinion—fixing and flipping can pay off big. We’ve seen new fix-and-flip investors become millionaires in just a few years. Profits can be high, and returns can be through the roof. But returns tend to suffer in a tight inventory market like the one we’re in today. When there are fewer homes available, retail buyers—the ones planning to live in the home—are more willing to buy fixer-uppers themselves. That increased demand drives up the price of distressed properties. As fixer values climb, turnkey homes (the “move-in ready” ones) see slower appreciation because they’re capped by appraisals. The result? Thinner profit margins and fewer truly profitable flip opportunities.
Today’s Housing Market Makes Flipping Tougher
If you decide to flip in this environment, your advantage comes from providing what buyers can’t easily find right now: a fully remodeled, move-in-ready home. There’s still strong demand for quality properties, especially in major metros with tight inventory. The biggest benefit to flipping is immediate profit. And as the saying goes, cash is king. Strong short-term returns can be very attractive, especially if you prefer liquidity or want to reinvest quickly. Flipping also has a few operational advantages: quick in-and-out transactions limit your market exposure, you avoid tenant and property management headaches, and you can recycle your capital faster for the next deal.
Why Long-Term Rentals Build Lasting Wealth
That said, I don’t really consider flipping an investment. Once the flip is done, your profits are done. Investing means thinking long term and building consistent cash flow. Flipping gives you a quick income burst, but rental properties create wealth through multiple channels: appreciation, monthly cash flow, tax advantages, and loan paydown. When you can buy rentals that cash flow from day one, it’s hard to lose over the long haul. With enough time and patience, and a stomach for the occasional tenant issue, rentals remain one of the most reliable paths to building wealth through real estate.
How to Decide: Flip for Cash or Hold for Cash Flow
It can be a tough decision, and the right choice depends on your goals and tolerance for risk. Here are a few practical things to consider when choosing between a flip and a rental:
- Balance short-term income with long-term wealth. Many successful investors, including self-made millionaires who flip for income, invest for the long run. If real estate belongs in your portfolio, consider buying rentals regardless of where you make your active income. Flip a few, keep one, and repeat until you’ve built a strong portfolio.
- Consider liquidity and timing. If you’re worried about the economy or expect more volatility, flipping might make sense until the market stabilizes and you feel confident holding long-term.
- Always have a Plan B. Choose deals that can be converted into rentals if the resale market cools or your profit margin disappears. Flexibility can save your deal.
- Learn the BRRRR strategy. Turning fixer-uppers into rentals has been a proven wealth-building model for decades – long before BiggerPockets gave it a name. If you’re willing to put in the work, you’ll often find better upside potential and stronger long-term returns than flipping alone.
My Personal Approach
I’ve made money with both strategies. Personally, I prefer rentals because of their long-term wealth creation and lower risk. Managing flips can be extremely profitable, but they take a lot more effort and oversight. If I find a deal that’s solid but won’t produce positive cash flow as a rental, I’ll flip it. I have no interest in feeding a rental property money each month, hoping it eventually pays off. As the saying goes, hope is not a strategy. I focus on profits from day one. No matter what, it’s critical to know your exit strategy before you purchase a property. But I’ll leave you with a piece of advice a mentor once gave me before my first flip: “If the deal is good… buy it.”
Key Takeaway
Flipping can be a great short-term wealth builder, but rentals are what build long-term financial freedom. The best investors know when to chase quick profits and when to hold for enduring wealth.