In real estate, a long-time debate remains: What offers the best return on investment—flipping a house or renting? The short answer—it depends on your financial goals and your lifestyle. In this article, we’ll compare the pros and cons of house flipping (seen as a short-term investment) and vacation rentals (considered a long-term investment), to help you decide which real estate path is right for you.
Flipping a house involves buying a property, renovating it, and trying to sell it for a profit.
Ideally, you purchase the property for less than market value. This can include buying a fixer-upper or a distressed property that is close to foreclosure. For the most experienced house flippers, the average time to flip a property is 6 months. For novices, the process could take a lot longer, perhaps more than a year.
Quick profit potential
If you do your research and find the right property to flip, you could make a substantial profit in a short amount of time. As stated above, the more experienced you are, the faster the process. Once you sell, you could end up with capital to make that dream purchase or even to put towards your next investment.
No ongoing expenses
Unlike renting out a vacation rental, flipping a house does not come with ongoing long-term expenses like maintenance, repairs, or property management fees. After making an initial investment, you’ll sell and move on—hopefully with a lot more money in your account.
Control over the project
Flipping a house gives you complete control over the renovation process. You can choose the materials, design, and layout. Best of all, you can save where you want to save, and splurge where you want to splurge.
Less ongoing hassles
Since you don’t own the property long-term, you don’t have to worry about hassles that vacation homeowners could face. No locked out guests, leaking pipes, or having to fill your occupancy year round.
High risk and unexpected costs
Flipping a house can be a high-risk investment. Sometimes the market takes a turn, contractors don’t deliver, a renovation takes longer than anticipated, or ends up costing more than you budgeted for. All which can eat into your profit margins or put you in the negative.
Requires significant capital upfront
Flipping means purchasing the property itself and covering the full cost of the renovations. You’ll also pay for all the housing costs while it’s under your name, such as property taxes, insurance, and utilities. Consider each of those expenses when deciding to flip or rent a home.
Turning a property around quickly could mean paying more taxes. The capital gains tax on a short-term investment (like selling a property less than a year after you bought it) is typically higher than the capital gains tax on a long-term investment (such as a vacation rental property that you hold onto for more than a year).
When you flip a house, you don’t make money until you sell the property. It’s a one-time payout that is linked to how well the market is performing at the time. You’ll also lose out on an ongoing income stream that a vacation rental could provide.
Lots of energy and time required
Flipping houses can be all-consuming, a process that many liken to a full-time job. You’ll need to dedicate time to searching the right property, renovating, working with contractors, and overseeing all the project timelines and hundreds of details.
Renting out a vacation home involves buying a property and renting it out to travelers for short-term stays. There’s a lot you can do to make your vacation rental successful, including:
The discussion of flipping vs. renting a home is easier for those looking for a new revenue source. Vacation rentals can deliver a consistent income stream, especially if you market it well and keep it booked. Full-service vacation rental management companies like Vacasa market your vacation rental on several channels to help boost bookings all year round.
You can potentially write off several vacation rental expenses to reduce your taxes. These can include:
If—or, when—you decide to sell your vacation home, your long-term capital gains tax rate may be lower than if you flipped the property instead.
The longer you hold onto your property, the more equity you can build, and the more your property can appreciate—all which can lead to increasing your wealth. Your rental income and cash flow could increase along with market changes, as well. When you decide to sell, you could land a hefty sum (especially if you buy and sell at the right times).
A personal vacation spot
Guests aren’t the only ones who can enjoy your property—you can too. Invite the family for a long weekend. Host the next ski trip. Escape for a romantic getaway. With Vacasa, you can block off your calendar as much or as little as you’d like. In other words—stay when you want, rent when you don’t.
When you own a vacation rental, be sure to factor in ongoing costs such as maintenance, repairs, housekeeping, property management fees, and marketing costs. A good way to maximize this spend is to work with a vacation rental manager with an all-inclusive fee, like Vacasa. Our management fee includes marketing, local support and homecare, 24/7 guest service, channel management, demand-driven rates, and more.
The demand for your vacation rental can depend on the season, weather, events, and other factors. You’ll have to continue paying expenses and mortgage whatever the case. However, there are several ways to get more bookings in low season, such as:
More ongoing responsibilities
If you don’t work with a vacation rental manager like Vacasa, you’ll be tasked with a long (and seemingly endless) list of responsibilities, including:
Ultimately, the decision to rent out your property as a vacation rental or flipping it for a faster profit depends entirely on your financial goals and long-term investment strategy. If you’re looking to take on some risk and months of renovations, flipping a house may be the best choice. If you prefer an on-going income stream and the potential for an appreciating asset, a vacation rental could be the way to go.
Whichever you choose, do your research (we have tons of vacation homeowner guides to help you be successful), and work with the right experts to meet your investment goals.
Call 844-518-0967 to speak with a Homeowner Consultant, who can answer preliminary questions and see if we’d be a good fit for you.
If you'd like to move forward, we’ll put you in touch with our market expert in your neighborhood to explore the financial potential of your home, outline our management fee, and introduce your local team.
Vacasa offers property management and other real estate services directly through Vacasa LLC and through Vacasa LLC's licensed subsidiaries. Click here for more information about Vacasa's licensed real estate brokerage/property manager in your state. Vacasa’s licensed real estate brokerages/property managers include: Vacasa Alabama LLC; Vacasa Arizona LLC; Vacasa of Arkansas LLC; Vacasa Colorado LLC (Micah Victory); Vacasa Delaware LLC, 302-541-8999; Vacasa Florida LLC; Vacasa Illinois LLC 481.014072, Micah Victory Managing Broker Lic# 471.021837; Vacasa Louisiana LLC, Dana MacCord, Principal Broker, ph 504.252.0155 (Licensed in LA); Vacasa Michigan LLC, 602-330-9934; Vacasa Missouri LLC, Vicki Lyn Brown, Designated Broker; Vacasa Nevada LLC; Vacasa New Hampshire LLC,45 NH-25, Meredith, NH 03253, Susan Scanlon, Broker of Record; Vacasa Minnesota, Broker: Micah Victory, license #40877637; Vacasa New Mexico LLC, 503-345-9399; Vacasa New York LLC, 888-433-0068, Susan Scanlon, Real Estate Broker; Vacasa North Carolina LLC; Vacasa Oregon LLC; Vacasa Pennsylvania LLC; Vacation Palm Springs Real Estate, Inc., California DRE #01523013, Mark Graham, California DRE #00700720; Vacasa Real Estate LLC (licensed in Texas, Debra Brock, Designated Broker); Vacasa Real Estate LLC (licensed in Washington, Robert Brush, Designated Broker); Vacasa Seasonals Inc., California DRE #02160171, Lisa Renee Stevens, California DRE #01485234; Vacasa South Carolina LLC; Vacasa South Dakota LLC; Vacasa Tennessee LLC; Vacasa Vacation Rentals of Hawaii LLC, 69-201 Waikoloa Beach Dr. Ste. #2F17, Waikoloa, HI 96738; Vacasa Vacation Rentals of Montana LLC, Terah M. Young, Licensed Property Manager; Vacasa Virginia LLC; Vacasa Wisconsin LLC; Vacasa Wyoming LLC. In Canada, this advertisement is provided by Vacasa Canada ULC, CPBC lic. number 75826, 172 Asher Rd. V1X 3H6 Kelowna, BC.