Should You Fix-and-Flip or Buy-and-Hold?

Today we’re tackling the age-old real estate investor question, should you fix-and-flip or buy-and-hold. 

If you’re new to real estate investing, you might not be completely clear on these investment strategies, but the names are fairly apt descriptions of each model. 

With fix-and-flips, you purchase a property that needs lots of work (at least cosmetic work), renovate it, and resell it for a profit as quickly as possible. With buy-and-holds, you purchase a property for the long-term, finding reliable tenants to rent the property from you. 

Both are completely legitimate investment strategies. You just need to know which will work best for you. At Sequoia Real Estate, we’re happy to provide the information you need to make the best possible decision for your real estate investments. 

Fix-and-Flip

The first thing you need to know about fix-and-flips is that they work best in quickly growing markets (like we’re seeing now in 2022). You don’t want to purchase a flip when the market is slowing because you could be stuck with a vacant property, just sitting on the market, losing money. But when markets are hot, your renovated property will likely be purchased quickly, so you won’t have to make many mortgage payments before the property is sold for a profit.

Pros and Cons of Fixing and Flipping

Fix-and-flip pros:

  • Quick returns. You might be able to complete the renovation and sell the property in just 4-6 months.

  • The opportunity to add value. You can improve the profile of the neighborhood through strategic projects.

Fix-and-flip cons:

  • You need the cash to cover the down payment plus the cost of renovations and the cost of holding the property until it is sold.

  • Specialized skill required. You need to know how to make the necessary renovations or be able to pay someone with the skill.

  • It takes a lot of time and effort. Unless you’re hiring someone to do all the work, be prepared to work hard for long hours until the project is complete.

Buy-and-Hold

Buy-and-hold investments are less dependent on market conditions because they are long-term investments. You’ll be able to ride out the slow years and capitalize on the hot years.

You might decide to buy a fixer-upper and renovate the property to immediately increase the value and the rental rates. Or you might choose a turn-key property that’s ready for renters. In some cases, you can even buy a tenant-occupied property from another investor, so you have immediate income. 

Pros and Cons of Buying and Holding

Buy-and-hold pros:

  • Appreciation as the property grows in value over the long term

  • Cash flow as you receive rental income

  • Tax breaks on expenses like depreciation, capital improvements, and mortgage interest

  • Tenants pay down your mortgage debt

Buy-and-hold cons:

  • Your capital will be tied up for a long time.

  • You’ll need to either deal with renters yourself (for issues like rent collection, lease renewals, and maintenance requests) or hire a property manager to handle the day-to-day operations.

  • You’ll be responsible for maintaining the property, which can mean unexpected expenses if repairs are needed.

Are You Ready to Become a Real Estate Investor?

The experienced agents at Sequoia Real Estate would be happy to help you find your investment property! Whether you’re looking to fix-and-flip or buy-and-hold, our agents have access to opportunities both on the market and off-market. And since all real estate fees are typically paid by the seller, it doesn’t cost you anything to have professional representation in the purchase of your investment property. 

Contact us today to let us know what type of property you’re looking for, and we’ll start combing the market to find suitable deals for you.