Real Estate Investing Guide: The Buy and Hold Strategy
In today’s article, we will look into the buy and hold real estate strategy as a way to build passive income and accumulate wealth over time. You might have heard of the buy and hold strategy in stock trading before. However, unlike with stock trading, real estate investing allows you to invest in a steadier market instead of dealing with the ups and downs of the stock market. Let’s look into the buy and hold strategy and whether it is a better option compared to flipping properties.
What is Buy and Hold?
As opposed to flipping properties, buying and holding real estate allows you to collect a monthly income and leverage tax advantages as well. Instead of flipping a property as soon as you renovate it, the buy and hold strategy entails that you hold it for a long period of time, from five to 30 years. As you hold the property in your possession, its value increases over time while you collect a monthly rental income. Once the property value exceeds the amount of money you invested into it, you can then sell it for a good profit.
Alternatively, you can always keep the property and continue collecting rental income, if that is your goal. Either way, you will have to deal with the challenges of being a landlord since leaving the property empty is not an option. It might seem like it's easier to just let the property sit there until its value increases enough for you to be able to sell it.
However, doing so is not an option because a vacant property can fall into disrepair, which would significantly reduce its value. At this point, you would not be able to sell it for profit. The good thing about the buy and hold strategy is that you get to make rental income while waiting for the property value to grow.
That way, you can get way more out of your investment than if you were to just flip the property right away. Besides, the rental income should cover the mortgage and the cost of maintaining the property. Overall, what makes the buy and hold strategy so beneficial is that it allows you to generate income both in the short term and in the long term sense.
Start Investing Through the Buy and Hold Strategy
If you plan to build wealth through the buy and hold strategy, the first step would be to purchase an income property. Finding the right property might take some time, depending on the market you’re researching and the overall budget you’ve got to work with. If you choose a rehab property, keep in mind that renovations could last up to a couple of months, which can affect your overall financial plans. Once you’ve got everything ready, you need to choose a financing option for the property, which we’ll discuss in another blog post. There is no doubt that the buy and hold strategy can be a smart choice for investments who are aiming for long term goals.
This is one of the most popular strategies in real estate and I myself prefer it over flipping homes. If holding onto a property and managing it along the way sounds like too much work for you, you can always have a property management company oversee the operations on site. It’s a good thing that there are numerous options when it comes to handling real estate investments.
Overall, the pros of buy and hold properties such as ongoing income, the increase in property values, and tax benefits make such an investment more than worth it. Potential cons include vacancy costs and management or legal issues, which can all be handled easily if you take the right approach.