A few years ago, a survey completed by RealtyTrac discovered a preference for buy and hold investing over fix and flip investing amongst serious property investors. The survey group was comprised mostly of investors who had purchased between two and seven properties that year. While some hedge fund-backed investors were also included in the survey, the majority of respondents were what we would call typical property investors. According to the survey, 63% of investors purchased properties either solely or primarily for rental real estate investing in 2012. Of the remaining 37%, only 24% purchased investment properties solely for fix and flip.
This trend appears to be continuing in 2015. Lawrence Yun, the chief economist of the National Association of Realtors, recently stated that investors had good reason to be optimistic about the housing market in 2015. Home prices are on the rise and expected to continue their upward trend for at least two more years. Plus, new homes are being built at an increasing rate.
Yun also commented that this year will be better for buy and hold real estate than fix and flip. However, he was careful to note that investment strategies must adjust according to specific housing markets.
For example, in hot housing markets like up-and-coming San Francisco neighborhoods, there is still the potential to make upwards of $100,000 gross profit per flip on high-end properties, properties often priced over $1,000,000 pre-renovation. In less demanding housing markets where home prices are expected to rise about 4% on average this year and into next year, buy and hold investments make a lot more sense.
Many investors prefer buy and hold strategies for a number of reasons. They tend to be more stable than fix and flip investments, they generate monthly income through rent collected, and they are less time-consuming and stressful than fix and flip investments. Whereas house flipping must almost always be a full-time job, buy and hold investing can be a side project or part-time endeavor. Fix and flip may have the potential to bring more money faster, but buy and hold investments have lower risks and above average returns.
Learn more about the current buy and hold market in your area, or get your questions about rental real estate funding answered by calling ZINC Financial today at 559.326.2509. We currently offer buy and hold loans at rates as low as 7.49%. Contact our team to learn more.