While there’s no actual way to make a “quick buck” in real estate investing, there are short-term investment strategies that can help you make returns faster. Wholesaling and house flipping are very popular short-term investment strategies that take much less time compared to buying and holding or renting.
If you want to get into short-term real estate investing, let’s look at what wholesaling and flipping are, what the difference between them is, and which investment strategy is right for you.
What Is Wholesaling?
With wholesaling, an investor will typically look for distressed properties the owner wants to get rid of. The investor will contact the owner and open a wholesaling contract that states the investor has a specific amount of time to spruce up the property and find a buyer.
Essentially, you would be taking an unwanted property off someone’s hands and selling it to someone else, ideally, for a higher return. However, most wholesalers make their money from the wholesale fee stated in the contract. The wholesale fee is typically about 10 percent of the property’s market price.
What Is House Flipping?
House flipping, also known as fix and flip, involves the investor purchasing a distressed property for a low price. The investor will then fix the property so they can sell it at a higher value. Ideally, it should get sold for more than the original buying price and renovation costs combined.
This is technically a short-term investment strategy, as fixing and flipping a home typically takes about six months. If you play your cards right, you can make a considerably large profit quickly, and you could be set for the rest of the year, if not more.
However, if you wanted the security of a long-term investment strategy, you could rent out the property for a steadier cash flow. This way, you can wait for the property to appreciate and sell when the lease ends.
Which Investment Strategy Is Right for You?
Ultimately, the difference between wholesaling and flipping is that you have more control over the selling process when you flip a home. With wholesaling, things can quickly get complicated, and you may not make as much of a profit. Many would argue that while wholesaling is safer, you’re more likely to profit more by fixing and flipping a home.
However, when house flipping, you have to be good at budgeting; you have to be absolutely sure that you can afford to buy an investment property. If you’re trying to determine which investment is right for you, it all boils down to how good you are with your hands. The more you can build, design, and repair yourself, the more profit you can make when you sell.
However, wholesaling is the better option if you’re not as good with your hands and don’t have discount connections with the necessary contractors. You’ll still be able to make a profit without having to do an extensive amount of repairs.