Holding versus Flipping

Everybody would like to make money fast by flipping properties. Is it possible? Absolutely, but it is not as easy as many gurus may have you think. Markets tend to be efficient and while real estate markets are probably the least efficient, there are still too many people looking for "below" market value properties. Most below market value properties are cheap for a reason and may require extensive fix-up work. If you are willing to do the work, there is a constant supply of properties that can be bought, fixed-up and sold at a profit. It is especially profitable if you can sell the property yourself. Otherwise, real estate agents will certainly appreciate your effort and take their bite out of your profit with sales commissions every time you sell. There are other opportunities (e.g., foreclosures, liens, etc.), but most of them also require fix-up work and not all foreclosed properties are available at a good price.

The good news is, that even properties bought at a fair market price can make you money. If the rental income is enough to pay the bills, you end up keeping all the property appreciation. In this case, it is certainly better to hold-on to the property for some time, since selling is expensive (transfer taxes, realtor commissions, etc.). It comes down to the question, how much do you mind landlording.