Should You Flip or Hold? How Real Estate Investors Can Choose the Right Strategy
Not all real estate investments are created equal. Deciding between flipping properties for quick returns or holding them as long-term investment properties comes down to one key question: What are your goals?
If you’re looking for short-term gains, flipping houses can generate active income fast but it comes with higher risk and repair costs. On the other hand, owning rental property allows you to build ongoing cash flows and passive income over time through appreciation, rental income, and tax benefits like mortgage interest deductions.
In this guide, I’ll break down both strategies using real-life examples from my experience in residential real estate across Albuquerque and Rio Rancho. Whether you’re looking to add to your investment portfolio or choose just one real estate investment strategy, this post will help you map out the best path for your financial goals.
Start Here: What Are You Really After?
Before choosing your real estate investment strategy, take a moment to reflect on your personal investment goals, financial needs, and risk tolerance. Are you aiming to generate quick capital or build long-term investment income? The answer will guide you toward either flipping properties or owning rental property as your preferred approach.
Why You Might Choose to Flip
If you need cash now, flipping houses is often the way to go. This buy and sell strategy offers fast returns that can be used to fund new investment opportunities, pay off debt, or reinvest into your portfolio. It’s ideal for investors who thrive on short-term deals and can manage renovation timelines.
Flipping is also considered active income, meaning you’ll likely pay taxes at a higher rate, especially if the property is held for less than a year. However, when market conditions are right, flipping can provide significant gains, particularly when working with distressed properties that can be quickly turned around for profit.
Why Holding Could Be the Smarter Move
On the flip side, a buy and hold strategy allows investors to benefit from rental income, property appreciation, and valuable tax perks like mortgage interest deductions. This approach is ideal for those looking to create ongoing income and build a more stable, diversified investment portfolio.
Holding an investment property means committing for a longer investment period, but it also means you can take advantage of long term capital gains tax rates and reduced volatility compared to the bond and stock markets.
If your goal is to accumulate wealth slowly and steadily, this route can offer stronger protection against market fluctuations while generating consistent cash flow.
The Flip Strategy: Fast Returns, High Risk
What Flipping Really Involves
Flipping properties can produce quick wins, but it’s a high-stakes real estate investment strategy that requires precision. The basic idea is simple: buy low, renovate, and sell high. But in practice, success hinges on multiple factors, including accurate budgeting, speed, and a sharp understanding of market conditions.
To maximize returns, flippers need:
- A good spread between purchase price and current market value
- Renovation know-how or a reliable contractor network to manage repair costs
- Great timing to avoid carrying the property too long, which increases carrying costs
Missing the mark on any of these components can eat into your profits—or worse, result in a loss.
What the Numbers Look Like
At the height of my flipping experience, I focused on residential real estate in Albuquerque and Rio Rancho. I bought 2-bedroom, 2-bathroom units in neighborhoods like North Hills for $30K to $50K.
After updates, I sold those same homes for $80K to $100K. With more than 120 properties flipped, I generated substantial active income, but every deal came with its own risks from transaction costs to unpredictable market fluctuations.
When Flipping Makes Sense
This strategy makes sense when:
- You need capital fast to reinvest or cover expenses.
- You spot a buyer’s market with high upside potential.
- You have experience (or a team) to handle renovations efficiently.
It’s also helpful when your investment timeline is short and you’re targeting less than a year per deal. But be aware: flipping is not just about profit. It’s about navigating a landscape full of individual property risks, tax implications, and shifting buyer expectations.
As I often tell new investors, flipping gave me the boost I needed early in my journey but I always knew the clock was ticking on every deal.
The Hold Strategy: Play the Long Game
How Holding Builds Wealth Over Time
The buy and hold strategy is a long-term approach to real estate investing that prioritizes stability over speed. Instead of aiming for a quick profit, you’re focused on building equity and enjoying ongoing income from rental properties over time.
Here’s how this strategy helps investors derive income and long-term value:
- Principal Paydown: Each mortgage payment made by your apartment tenants or renters increases your equity.
- Appreciation: As property values rise, especially in growing markets like Albuquerque, the asset becomes more valuable.
- Depreciation: You can claim this tax deduction annually, reducing your investment income tax liability.
Over time, these three elements work together to ensure ongoing cash flows and grow your investment portfolio. The wealth doesn’t arrive overnight, but it compounds significantly when managed well.
What Holding Looks Like in the Long Run
Let me give you a real-world example. Out of the 120 properties I flipped, I held onto only a few. But if I’d kept just 10%, even 12 to 15 units, those homes would now be worth $250K or more each. That’s not just passive income, that’s generational wealth.
There are always investors who say, “I wish I would’ve kept that property.” So buying and holding is never a bad idea
Owning rental property often becomes more attractive in hindsight because of its ability to weather the stock and bond markets, generate reliable income, and appreciate over decades.
When Holding Makes Sense
This strategy is a strong fit when:
- Your investment goals are focused on retirement planning, legacy wealth, or passive income.
- You have enough financial cushion to hold the asset for 5–7+ years, even through market fluctuations.
- You’re looking to benefit from mortgage interest deductions and reduced property taxes over time.
If you hold your properties for at least five to seven years, they become powerful tools for retirement planning. I urge investors to think of these as “forever purchases” that can supplement income well into their later years.
Flipping vs. Holding: A Quick Comparison
Still undecided on your real estate investment strategy? Here’s a side-by-side breakdown to help clarify which approach aligns best with your investment goals and current financial situation.
| Strategy | Best For | Pros | Cons |
| Flipping | Quick capital | Fast returns, flexible use of capital | High transaction costs, short investment period, taxed as active income |
| Holding | Long-term wealth building | Rental income, appreciation, tax advantages | Slower returns, ongoing property management and maintenance and repair costs |
Both strategies have their place. Some investors even blend them: flipping distressed properties for capital and holding select units for stable returns, to build a diversified portfolio of residential real estate over time.
Still Can’t Decide? Ask Yourself These Questions
Choosing between flipping and holding isn’t always easy, especially when market conditions are constantly shifting and your risk tolerance evolves over time. If you’re stuck between strategies, ask yourself these four critical questions:
- Do I need capital now, or do I want steady income later?
Flipping may offer fast access to active income, while holding can create passive income through ongoing cash flows like rental income. - How comfortable am I with managing renovations or construction?
Flipping often requires handling repair costs, contractors, and tight timelines. This can affect your carrying costs and overall profitability. - Can I afford to hold a property for 5+ years?
Buy and hold strategies require patience but can pay off through appreciation, mortgage interest deductions, and reduced exposure to market fluctuations. - Could tax benefits like depreciation or long-term gains help me right now?
Holding offers tax advantages like depreciation and long-term capital gains, while flipping usually means you’ll pay taxes on gains as ordinary income.
These questions help clarify whether you’re aiming for short-term capital or building wealth with a more stable real estate investment.
The Hybrid Path: Flip Some, Hold Some
A common path for many investors is to start by flipping. This generates the capital you need to eventually transition into holding properties. Over time, you can balance both approaches to enjoy the best of both worlds.
For instance, I kept a portion of the units I flipped early in my career. That decision helped set me up financially for the future while still keeping cash flow readily available.
Want Help Mapping Out Your Strategy?
Whether you’re exploring the rental market, considering flipping houses, or weighing whether to buy and hold property, it’s important to remember this isn’t just an investment strategy; it’s a decision that affects your financial future. Each option has trade-offs based on costs flipping houses, mortgage interest, and your given investment period.
At Absolute Real Estate, we help you navigate both local market conditions and broader real estate markets so you can build a portfolio that aligns with your goals. Whether you’re managing renting houses or working with property managers and a management company, we’ll help you compare returns across real estate and beyond.
Let’s work together to create a plan that fits your unique needs. Our team of expert real estate agents is ready to help you get clear, take action, and start building lasting wealth.
