When it comes to being an intelligent and responsible investor, diversification is key. Stocks, index funds, and fixed-income funds are just a few ways to avoid putting all of your eggs into one basket. 

Another way to achieve some needed diversification involves flipping or renting out properties. Typically this would involve buying a property, fixing it up and then making a tidy profit either through selling and getting a substantial, upfront payday, or through renting it out to enjoy a steady stream of income.

What follows is some information on how to make a profit by flipping or renting.

Flipping Out

If your goal is to make a tangible profit in a relatively short period of time, than house flipping may be right up your alley. The benefits include a large sum of post-sale money sooner rather than later, a wide range of financing options, and an ability to pursue properties in the majority of markets. Those are the pluses. The negatives? Lofty tax penalties, risk, and potential challenges in managing contractors.

One of the best ways to boost your odds of a high profit, even as you deal with the risk of buying and selling real estate, is to buy low. You’ll be most successful if you can buy a property at a price substantially below its appraised value, do the renovations and upgrades yourself, or with the help of those with the requisite skills, and then sell for as much as you can get.

Renting Out

If flipping presents more risk than you’re willing to take on, then renting out properties might be a better option. The benefits of renting out properties include ongoing passive income and substantial tax benefits. However, negatives include the possible difficulty in getting financing, inability to rent out properties in some markets, and possible issues in dealing with problematic tenants.

You can maximize your odds of making a profit on rental properties by either picking up properties in desirable areas where demand exceeds supply, or by vetting your tenants to increase the odds that said tenants will be able to pay rent on an ongoing basis.

Flipping and Renting?

One option would be for you to flip houses and also to rent out properties. However, many experts believe that it’s wise not to try to do both at the same time since you’ll require a different mindset for flipping than you will for renting.

At the end of the day, you can make a profit by flipping or renting out houses. Consider the aforementioned advice, and then decide for yourself whether or not flipping or renting out makes sense for you.