Here’s answer I wrote recently to that question on Quora:
I’d guess flipping shows the greatest short-term potential, but as with most investments return is related to risk, and there is certainly risk in flipping. For example, what if in the remodel process you discover something not in your original estimate? What if the market turns between the time you buy and finish the remodel? What if the adjacent property is bought for something undesirable – pig farm, shopping center, fast-food restaurant, 10-story condo or apartment
Buying something to rent is lower risk but you need to be in it for the long haul. Investors I’ve worked with look at it for a minimum five year project and, depending on cash flow and their financial situation probably longer. The biggest single advantage to buying investment property is in the depreciation, but that’s not of as much value if you don’t have other income on which it can offset your tax bill. Cash flow depends as lot on how tight the rental market is. Portland right now is super-tight, but the City of Portland also prevents no-cause evictions and/or rent increases of more than 10%/yr without paying relocation costs to the tenant which range from $2900 (1-BR or SRO) to $4500 (3-BR or more). This does not apply to Portland area properties outside the Portland city limits
If you’d like the same patient, professional help I’ve given other real estate investors, please contact me.
This chart is the simplest answer to both questions.
The longer you rent, the higher the cost, and while you have paid for a place to live, you have nothing to show for it but rent receipts.
On the other side, buying a property to rent has all the advantages the renting does not. In either case, a fixed rate mortgage would hold your costs level (OK taxes might go up, but that's a minor part of the equation), while your rental income increases.
And in both cases, there are significant tax advantages. For Home Owners, mortgage interest is tax deductible. For Investors, you also get depreciation and other deductions. Don't believe me? I can recommend a good Portland CPA.