When is a buy & hold rental property strategy a better choice than a buy & flip? These 6 key criteria can help you determine when the time is right to add a rental property to your portfolio – and when it isn’t.

• If you need a more stable and reliable income stream,a buy & hold rental property can help keep your family afloat through the ups and downs of flip projects.
• If you need to free up all the capital you can get your hands on to keep funding new projects, it is not the right time to keep money tied up in a buy & hold property.
• If you need a lower tax bite than what you’ve been paying for flips, the better tax treatment of rental properties is worth a serious look.
• Developing a real estate portfolio you can retire on in the next 5 to 10 years virtually requires a certain amount of rental property. Fix & flips provide a one-time shot of new cash profits, while well-managed rentals in the right market provide a steady income that bridges most economic downturns.
• Holding a rental property requires management time and attention that isn’t always on a predictable schedule. A phone call from a tenant almost always requires immediate and focused action by the landlord-owner. If such demands are unrealistic for you, or you just aren’t of a temperament to deal with them, it may be best to avoid owning rental properties, or only participate as a silent partner.
• Thinking of hiring a property management company to handle your rental investments? Be aware that there are many such companies, and in my opinion only a very few are worth their fees. Someone has to manage the management company and ensure they are following through, while they typically take a large dip out of the profits.

Rental properties are essential components of many successful portfolios, but don’t go into a rental on a random whim or as a fallback of a problematic flip project. Do move forward with a rental property when you are ready to take it on, after careful consideration of the strategic benefits and drawback of rentals.