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House flipping vs buy and hold investing: Expert opinions

Imagine the real estate market as a vibrant masquerade ball, full of energy and excitement. In 2022, the dance floor was alive with flips in Canada generating an average gross profit of over 40 per cent.

Try to visualize this not as a mere statistic but as the pulsating rhythm of a drumbeat resonating through bustling streets from Vancouver’s towering glass buildings to the charming row houses of Halifax.

Now, take a moment to imagine the contrasting scene. In the shadows of the ballroom lies another dance: the buy and hold strategy. It’s like an enchanting waltz that symbolizes patience awaiting the rise and setting of the moon while observing seasons change from within a cozy and cherished home.

You, as Canadian realtors, are at the heart of this ball. Each property represents a dance partner whispering secrets about gains or long-lasting relationships. Will you immerse yourself in the exhilarating whirlwind of flipping or gracefully embrace the enduring stability that comes with holding?

This article contains stories from within these walls, market dynamics insights shared in hushed voices and reflections. So, what kind of dance are you planning to do tonight? Let’s take the step and explore together.

 

A comparison: House flipping vs. buy and hold investing

 

Andrew Pierce, CEO of LLC Attorney, explains, “When we compare the practice of house flipping with buy and hold investing in the real estate market, we uncover a story of risk, reward and strategic expertise. Both strategies have their tales of success and challenges offering valuable insights for professionals in the real estate industry.”

 

House flipping

 

House flipping involves acquiring properties, renovating them and quickly selling them for a profit. It requires making decisions based on potential and understanding market trends.

Individuals have even discovered ways to flip houses without investing much by utilizing creative financing options and forming partnerships to minimize upfront costs while maximizing returns.

Success stories: Extraordinary individuals like Scott McGillivray in Ontario and the Property Brothers in Alberta serve as examples of what can be achieved through house flipping. They have built real estate empires by undertaking lucrative renovations while seizing opportunities offered by the Canadian market.

Challenges: It’s important to acknowledge that house flipping is not without its challenges. The reality of this practice often proves demanding and occasionally discouraging.

The way home improvement shows glamourize flipping can sometimes overshadow the complexities and risks involved. Flipping houses comes with market volatility uncertainties regarding renovations and the potential for unexpected expenses that can eat into profits.

 

Buy and hold investing

 

When it comes to buy and hold investing, there are both achievements and obstacles to consider.

Achievements: Experienced investors have succeeded in building wealth by choosing properties that generate consistent rental income while also witnessing significant appreciation in value.

Obstacles: Buy and hold investing also presents its set of challenges. Managing rental properties requires property management skills and a keen awareness of fluctuating market conditions to ensure sustained growth.

For instance, consider the story of Canadians who bought a duplex near the University of Alberta back in 2003. Over 14 years, they witnessed appreciation, resulting in equity gains and positive cash flow. This highlights the long-term advantages of investing in growing markets using a buy and hold approach.

Plus, it’s essential to grasp the impact of population density on property investors in these situations. When areas experience a rise in population density, there tends to be an increased demand for properties. This can potentially result in higher property appreciation over time.

“When it comes to investing in properties for long-term gains (rather) than quick profits, there are certain challenges that one needs to consider. These challenges include managing tenants, maintaining properties and navigating through market fluctuations over an extended period of time. Successfully tackling these challenges requires skills such as patience, long-term planning and foresight about market trends,” explains Jim Pendergast, vice president at altLINE Sobanco.

 

How to choose

 

Both house flipping and buy and hold investing have their attractions and considerations within real estate. House flipping may offer returns but comes with higher risks that necessitate a deep understanding of market dynamics and property valuation. 

Buy and hold investing can provide a steady cash flow and potential capital appreciation over time, but it requires a long-term commitment and proficient property management skills.

In choosing between house flipping and buy and hold investing, carefully evaluating the potential return on investment is essential. An ROI calculator can be an invaluable tool here, helping realtors and investors project and compare each strategy’s financial outcomes based on various market conditions and investment scenarios. 

Bruce (Mingchen) Chi, co-founder and CEO of SuretyNow, adds, “This objective, data-driven approach supports making decisions that are not only aligned with individual investment goals and risk tolerance but also grounded in a realistic assessment of potential financial returns.”

 

House flipping offers rewards but requires an understanding of market rhythms. Buy and hold investing offers gradual growth and stability over a longer period. It requires patience and long-term planning.

Both strategies are not about investments — they reflect personal narratives in the broader story of Canadian real estate.

As you move forward, armed with these insights and shared experiences, remember that your decision will shape your future as well as impact communities and lives affected by these investments.

 

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