Can I make money through property investment? You absolutely can.

For starting investors, the real question is how. More specifically, you have to determine what type of strategy you will go for. After buying a property, how will you utilise it to generate profit?

Two of the most common ways are by flipping and by leasing. Let me discuss how these two strategies compare in today’s blog.

Property Flipping

The concept of flipping is quite simple: you buy a property at a low price, you renovate it, and you resell it at a higher price. However, actually executing it is much more than just a walk in the park.

It is the choice of strategy for investors who want to go big, prefer a faster ROI, and have no intention of keeping the property.

Looking at the statistics, there is a very good reason to consider flipping. The Office for National Statistics reports that house prices in the UK have been on an upward trend since the second half of 2020.

Advantages of flipping a property

Faster ROI

To expert practitioners, the entire process of flipping can be as short as 6 months. This includes the prospecting of property to buying, renovating, and selling it. However, you have to manage your expectations if you are new to the business. On average, the turnaround period is 12 months.

No need to maintain the property

Like any tangible asset, a property requires regular maintenance and at times, necessary repairs. If you are a flipper, this is something you ought not to worry about since you will transfer the ownership of the property once you sell it.

You don’t have to deal with renters

Finding a buyer for the property can be a challenge but once sold, you are free to walk away with your hard-earned money. No awkward visits to collect the monthly rent or answer complaints.

Challenges of flipping a property

High initial funding

If you are buying a property with the plan to flip it, you have to plan your funding very carefully. After purchasing, you have to make sure you have a sufficient budget for the renovation works and other expenditures.

Find out how you can start a property business without the need for big capital in our upcoming free event, .

Finding the ideal property

Successful flippers invest a lot in prospecting for the right properties. The outcome of the project will highly depend on this first step.

The ideal property is one that is available at a low price but in an area with high marketability. It is also important to assess the condition of the place to know if there is any major issue that will require costly repairs.

Partnering with a contractor that can deliver

Renovating the property will dramatically increase its value and sellability. However, it has to be accomplished without exceeding your budget and within your projected timeframe. Needless to say, it has to look good too.

While most contractors are well-experienced in building homes from the ground up, not all are experts in renovation work. You will need to put effort into finding the right team to do the job.

Property Leasing

Leasing out a property, referred to as rent-to-rent, is a property business type wherein you keep the ownership of the place but allow it to be used by another party for an agreed fee.

With this investment strategy, you can earn a steady income while retaining your asset. However, it also means you have to maintain and operate it. 

Advantages of leasing a property

You have a steady and consistent source of income

The very idea of letting a property is to allow your asset to generate profit for you. Though it is not a one-time big-time paycheck like with that of a flip, this strategy can bring you a continuous cash flow that is predictable and less risky.

You keep the property as your asset

Even if you choose not to resell the property right away, you can always do it later on. What’s even better is that properties tend to increase in value over time.

In a recent study, the UK was shown to have an average appreciation rate of 9.3% based on data from the past 50 years. This means your property can almost double its original value in a span of a decade.

Benefit from tax deductions

When operated as a rental business, your property can entitle you to several advantages on taxes. In the UK, you can claim tax deductions for expenses incurred on operating the business, conducting maintenance works, and depreciation in value.

In comparison, you can expect a high tax fee if you sell a property.

Challenges of leasing a property

You have to source and manage tenants 

Leasing your property is an excellent means of passive income, but to do this, you first have to find a tenant. Moreover, you have to maintain a healthy business relationship with them as a landlord.

You are responsible for maintaining the property

If you want to retain or increase the value of your property, you also have to invest in maintaining its condition. You have to be ready to conduct repairs and renovations after each turnover.

You will be tied to a lease contract

Though you keep the ownership of your property, letting it will mean less flexibility. You will have to forego your access to the place and uphold the terms of the contract for the duration of the lease period.

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