Why Renting Your Property Is a Better Investment Than Flipping It

It’s an age-old real estate debate: Is flipping or renting a property a better investment? The reality is that the question itself breaks down when you consider the true definition of investment: committing money or capital to an endeavor with the intention of obtaining additional income or profit.

When it comes to flipping a house, you’re not merely committing money or capital. You’re committing time to project management, budgets, timelines, and (potentially) actual labor. Yes, you might reap a significant reward when the property sells, but you’ll have to earn that profit.

Active Vs. Passive Income

That’s why flipping a property is considered active income—you’re earning money through day to day work. Stop working and you stop getting a paycheck (or delay your payday, in the case of flipping).

Passive income is literally less work. It comes from receiving regular profit from investments. The income keeps coming, no matter what you’re doing or where you are. Monthly rent checks are a perfect example of this, especially if you work with a property management team in Minneapolis or the Twin Cities.

Short-Term Payout Vs. Long-Term Returns

Owning a rental property has the potential for long-term returns, even more so if you hold onto the property for several years. You won’t receive the up-front payout that flipping a house might provide, but you’ll instead capitalize on the consistent monthly income that can add up to better investment in the long run. Property management can help you build wealth and financial independence through ongoing income.

Minnesota Property Values Should Increase Over Time

When you flip a property, you only benefit from the snapshot of the time period when you sell. If you land in a buyer’s market, you might lose money on your initial investment or be left holding properties longer than you want.

With property management and renting, you’ll benefit from a longer perspective on the market value, as well as usual inflation. As your property rises in value, rents can rise too, providing you with more monthly income. And if you eventually do decide to sell in the future, you can enjoy a sizeable return.

Property Management Has Tax Incentives

Investment income is usually taxed at between 15 and 20%, while the flipping rate is closer to 25 to 43%. From the get-go, you’ll save money on taxes, money that can be re-invested into the property, used to work with a Minnesota property management team, or be added to your bank account.

Rental property costs can also be written off—repairs, improvements, drive to and from the property, property management teams, etc.—as can depreciation of your asset. This can save you thousands of dollars per year in taxes.

The bottom line? Renting your property can produce more income and wealth over time than flipping can. See how Twin Cities Leasing can save you even more time and money as the highest rated property management company in Minnesota.