It seems like one of the most popular questions we get when we tell people we are real estate investors is, “So you guys flip houses?” No, we don’t. We did try it once, but it did not end very well, but that’s a story for another day. Here are several reasons why we don’t flip our investment property.
We live in a small area.
In order to make flipping houses worth it, you need to live in a bigger market where you can turn over 10 properties in a year. In our area, the market can be very slow, so if you want to sell a property you have to plan on it taking six months. That’s not ideal for flipping properties.
There’s a capital gains issue.
If you sell real estate or property, either for personal or business purposes, and make a profit from the sale, then that qualifies as a capital gain and you have to pay a hefty extra tax. This tax could be anywhere from 15-35% and can often wipe out much of the money we would make by flipping a property. To make capital gains worth it, you’d have to be able to flip quite a few properties, but as you saw in number 1, that doesn’t work for where we live.
No Residual Income.
When you buy and hold as we do, you create monthly income versus a one-time payment. When you stop flipping, the income stops. In our model, when you stop acquiring homes the income on the properties you already own continue to come in. While flipping is a short term investment, the buy and hold strategy is a very long term strategy.
So there you have it, a few big reasons why we don’t flip houses. Do you flip properties? Leave a comment below and tell us if its working for you.