The real estate industry attracts many investors who aim to break into the sector and generate profits. With the demand for properties on the rise, it’s become common for more people to try and join the industry as realtors or investors. The best part is that the real estate industry is so big that it can accommodate novice and experienced investors. Moreover, it’s an excellent way to diversify and protect your investment portfolio.
As an investor in real estate, you’ve probably come across wholesaling real estate and flipping real estate. These are the two primary investment paths that most investors choose to follow. They are different, so you have to choose the one that suits your investment goals and the one that works best for you.
This article will look at the difference between the two and which is more profitable for beginners between them below.
1. What Is Wholesaling
Wholesaling is a more accessible and less risky way of investing in real estate. There are even several resources, such as Astro Flipping, among many others that can help you with wholesaling. If you’re wondering what is astroflipping, it is an online course that teaches investors how to wholesale real estate. It is constructive for beginners who’d want something to guide them through their investment journey.
Real estate wholesaling is a short-term business strategy investors use to make money from an investment property. The “wholesaler” will find an undervalued property, put it under contract, and then assign the agreement to another investor for a fee.
Wholesaling is the art of selling a real estate deal to another investor before you buy it. The benefit of wholesaling an agreement is that you don’t have to bring any cash. You will also get paid for finding deals and get paid for putting a buyer and a seller together.
2. What Is Flipping
The concept of flipping is simple: Buy low, sell high. But this investment path takes a lot of work. You have to find properties below market value and then renovate them so that they are attractive to buyers who will pay top dollar for them. When you get your strategy right and time the market correctly, you can be assured of making profits. But if you mess up any part of the equation, you could lose money instead of making money.
For example, let’s say you purchase a home for USD$100,000 and put USD$10,000 worth of work into it. You sell the property for USD$150,000. In this case, your total investment was USD$110,000 (USD$100,000 + USD$10,000). You would make a USD$40,000 profit if you flipped the house.
3. Which Is More Profitable For Beginners
Both wholesaling and flipping are good investment paths for a real estate investor. While they may seem similar as they involve selling a house to make money, they’re different.
Moreover, they can be profitable to beginners, depending on their strategies. Here’s a brief guide on factors that determine which will be beneficial:
Risk is an essential factor to consider when assessing the profitability of real estate investment. Wholesaling is less risky than flipping, and therefore, you don’t have to worry about losing your money in the investment. In many cases, you may not be required to put any money, and if you have to do so, then it’s not much. So, a profit is guaranteed when wholesaling.
On the other hand, flipping a real estate property is riskier than wholesaling. You first have to purchase a property, then renovate it before selling. Here getting a profit is a gamble as you may still make losses if you sell at a lower price than you had used to purchase and renovate. However, as the house is in good condition, timing the market value well could mean making more profits than you’d have gotten if you opted for wholesaling.
5. Market Value
Another major determinant of which will be profitable is the property’s market value at the time of sale. When buying a property for wholesaling or flipping, it’s likely to cost you the same amount. However, when wholesaling a house, you’re going to make a little more of what you had paid for it. Also, the chances are that you’ll sell the house to another investor who will flip it before selling.
In contrast, flipping a house allows you to take advantage of certain market conditions that may not be available wholesale. For example, if a family is looking for a home, they’re likely to purchase a house ready for moving in and not a place that needs renovation. Therefore, you’re more likely to make more profits if you had flipped the property instead of when you had kept it for wholesaling.
6. Number Of Houses To Be Sold
When wholesaling in real estate, you can sell as many houses as you like in different locations without spending much money. It increases the chances of making more profits as the demand for homes will differ depending on location. So, while you may not get a buyer in location A, there’s still a chance of getting a buyer in location B.
Flipping houses requires you to use the money to renovate the home before selling. As a beginner, you’ll want to start with one place first before trying to flip multiple properties at once. It means that the number of houses you can sell at a time is limited. Consequently, your profit is also limited as the house may not sell as fast as you’d wish.
Each strategy has its pros and cons. Wholesaling is less risky than flipping, but your profits will be limited if people want ready houses. Flipping is more complex, but it allows you to control the process from start to finish. There’s no hard-and-fast rule if you’re trying to decide between wholesaling vs. flipping. Ultimately the best option for you depends on your strengths and weaknesses as an investor.
If you’re starting as an investor, your best bet is to try one strategy first. For instance, try wholesaling first. If that works out well, consider trying your hand at flipping houses. If one approach isn’t working out, you have another option.