The biggest difference between flipping housings and buying rentals is that flipping requires active management, while rentals earn you passive income from monthly rent.

The pros of flipping houses

Flipping houses has significant advantages. The primary benefits are that you can make lots of money at one time and it’s a short-term investment.

You can make large amounts of money quickly

Flipping properties can produce a large income in a short amount of time. Most flips can be completed in three to six months and produce tens of thousands of dollars in profit if done properly. The faster your money is returned to you, the higher the return on investment and the more deals you can complete.

If you complete five flips per year making $20,000 per flip, you could earn $100,000. Making the same amount of money with rental real estate would be extremely difficult in the same amount of time.

It’s a short-term investment

While you still have your fair share of management dealing with contractors and real estate agents, flipping a house is a short-term investment. In just a few months, the project is completed and you can move onto to the next venture — hopefully with some money in your pocket.

The cons of flipping houses

Higher taxes

When a property is sold for more than it was purchased for, it’s subject to capital gains tax. The capital gains tax rate varies based on the time the investment was held.

At the mercy of the market

Investments that rely on appreciation aren’t investments — they’re speculations. Flipping houses assumes the improvements will increase the property value enough to make a profit. And that relies on current or improving market conditions.

The pros of investing in rental properties

Buying rental properties has some big benefits — namely, that you get to take advantage of high cash flow, tax benefits, property appreciation, and recession-resistance.

Cash flow

One of the largest benefits of buying rental property is cash flow. Rentals are typically a long-term investment that can provide substantial passive income to the owner over time. Cash flow, especially creating passive income, is a significant contributor to building wealth and financial independence.

Tax benefits

Owning real estate, especially rental properties, presents several tax advantages. Rental property owners can deduct expenses relating to the operation and maintenance of the property, including property management fees, property taxes, mortgage interest, and other expenses.

https://www.fool.com/millionacres/real-estate-investing/articles/flipping-vs-renting-which-better-and-why/