Flipping Houses vs. Note Investing
Both flipping houses and investing in mortgage notes have raised in popularity in the last year. Which is the better real estate investment and why?
The Rise of Real Estate Note Investing
The interest and hype around mortgage note investing has rocketed in the last 18 months. This isn’t a new form of real estate investment; it has been used by savvy investors for years. However, with a lack of other deals, poorly performing other types of investments, being far too scary to leave too much capital in the bank and a desire for simplicity it has caught on with many more individuals than the early 2000 boom years. Though of course much of the noise is stemming from those who were involved in other facets of the real estate or mortgage business before and need a way to make up for lost income.
Note buying can be a great move for some. It offers above average returns, hands-free investing and passive income for retirement secured by a real asset. This makes it a great choice for those nearing or at retirement age who have all the savings they need and just want to achieve more income while they are finally off enjoying their freedom.
So what’s the downside, why weren’t more individuals chasing this real estate investment strategy before?
There are two main drawbacks of note investing. The first is that it can be extremely complicated and risky for investors who don’t understand all of the complexities of what makes sound note investment. The second is that these notes only throw off income and offer no capital growth.
When Flipping Houses Trumps Note Buying
Flipping houses has become more popular recently not just due to reality TV but all of the right conditions lining up for acquiring bargain deals and turning them over for a handsome profit.
Flipping houses is generally considered the fast money strategy. This is ideal for those needing to make large amounts of cash now to catch up on retirement savings and who want to enjoy a better lifestyle in the short term. This if often more critical to future financial security than most realize as the amount of money required to retire often far exceeds expectations.
This is also the best strategy for those who don’t have much of a nest egg to start with. In fact using transactional funding new investors can get started with no money down.
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