When you find yourself a good real estate investment, deciding what to do next is the biggest step. Maybe you want to renovate it, add a new coat of paint, maybe take out a wall and create an open plan, and then pop it on the market at a better price? 

That’s a fine way to make a profit through real estate, of course – but it might not be the best use of your time or money. Instead, you may want to focus on property rental instead. Here’s why. 

Selling vs. Renting Out: What You Get

Selling

When you buy to sell, you get one big payday. And that’s nice for many reasons! You don’t have to wait on your cash, and you don’t have to pay for a property to sit empty and gather dust. 

However, once the property is sold, it’s gone. You have to start the process all over again, gathering funding, paying down the mortgage, and adding value to try and create a much wider pool of ROI to fish from. 

Renting

When you buy to let, you get monthly income. You’re not increasing the home’s value to put it straight back onto the market. You’re holding onto it and letting the profit come to you.

When you’ve got Cash Flow Rentals under your name, you’re going to be bringing in repeat revenue month after month, and not just getting one lump payout the moment a buyer signs on the dotted line. 

Why Renting Tends to Bring in a Larger Profit

Let’s say you’ve bought an apartment for $150,000. After one month of owning it without a tenant, you bring one in and agree on a 12 month lease, with monthly rent locked in at $1600 PCM (based on average rent prices in the US). 

The property has been empty for around 28 days, and you’ve been paying for the mortgage on the property, property taxes, any insurance policies you hold, as well as any water, electricity, and heating bills. Altogether, you’ve paid out about $800 on the property while it’s been empty. 

Once your tenant moves in, however, that’s your monthly payments covered, and then a pure $800 profit on top (assuming the tenant doesn’t have to pay extra for utilities). As such, by the end of the 12 month lease, you could be sitting on $9600. 

With a tenant deposit, you could also cover the $800 you lost while there was no tenant.

Now, if you had bought that apartment, spent $15k adding an extra $20k in value, and then sold it for $200,000, you’d only be creating an ROI of up to $20,000. Hold onto your rental property for 2 and a half years and you’ll make more – even if you never increase the rent in that time.

Holding onto a real estate investment can create better ROI. Make sure you weigh up the pros and cons between selling and renting before making any big decisions.