Real estate investing is not only one of the quickest ways to make money; it is also one of the most diverse. With such a myriad of real estate investment strategies, potential investors can invest in various ways that best suit them. And when it comes to discussing lucrative and suitable strategies, we should always begin with buy and hold real estate.
Related: Mini Guide to Buy-and-Hold Investment Properties
What Is Buy and Hold Real Estate?
The buy and hold real estate strategy is exactly what its name implies. You purchase a residential investment property (the ‘buy’) and invest in it for the long-term (the ‘hold’). This is typically the first, and sometimes only, strategy many real estate investors employ. Investors may not even be aware of its name, but because buy and hold real estate is so common and successful, it has become the go-to strategy in the business.
When Is Buy and Hold Real Estate the Best Investment Strategy?
Almost without a doubt, buy and hold real estate is the best investment strategy. When is it the best investment strategy? Virtually all the time! The strategy is so successful for various reasons, namely its flexibility and profitability. Both factors are interrelated, as you will soon see.
To see just how flexible buy and hold real estate really is, take a look at the investors who invest with this method. Some are in it primarily for short-term gains, like rental income. Others have their eyes set on long-term profit, typically in the form of equity and appreciation.
Related: 6 Things to Know About Real Estate Appreciation
How profitable can buy and hold real estate be? The answer needs an entire section on its own!
What Are the Benefits of Buy and Hold Real Estate?
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Cash Flow
The bread and butter of all residential real estate profit is rental income. Once expenses are fully covered, what’s left of the rental income is called cash flow. It goes without saying, but positive cash flow is what all real estate investors should strive for. With buy and hold real estate, cash flow is generated efficiently and quickly.
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Appreciation
One thing buy and hold real estate does so well is generating both short-term (like monthly rent) and long-term benefits. Rental income is the main short-term benefit out there. Its long-term counterpart is appreciation.
Appreciation is the increase in value of a real estate property due to time. Although there can be slight fluctuations in value from one year to the next, a property’s value almost always increases significantly over the long run. This long-term increase isn’t a slight uptick; it can double, or even triple, the overall value of the property! This will lead to an excellent return if you decide to sell the investment property.
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Equity
Another long-term benefit of buy and hold real estate is equity. Equity, like appreciation, relates to the value of an investment property. Unlike appreciation, however, equity is the difference between the market value of a property and the amount of the mortgage needed to be repaid. A straightforward way of understanding this is through a simple equation: equity = asset (property) – liabilities (mortgage). Equity is most important when the property is being sold. While it often isn’t a prime reason for investing in buy and hold real estate, equity is a nice added bonus that comes with the strategy.
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Tax Benefits
All real estate investors are qualified for some nifty tax deductions. These tax benefits can be so great (depending on your state/local governments) that they incentivize people to invest in real estate. Once again, buy and hold real estate demonstrates its ability to generate multiple benefits, both in the short term and long term.
How to Go About Buy and Hold Real Estate?
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Finding the Right Neighborhood and Property
As mentioned a million times already, buy and hold real estate reaps both short-term and long-term benefits. For this reason, you need to be extra diligent when searching for the optimal property.
Finding the right property starts with finding the right neighborhood. This can be pretty tough, especially if you want to invest in an unfamiliar location. The solution? Mashvisor! Mashvisor’s property search allows you to analyze areas with all the relevant and up-to-date information necessary. Cap rate, cash on cash return, or cash flow, whatever your focus is, Mashvisor’s filters will allow you to find the neighborhood best suitable for you.
Related: How the Property Filters at Mashvisor Make Your Property Search Easier
Once you’ve settled for an area, you can begin looking for the property of your dreams. Once again, Mashvisor is here to help! Mashvisor’s filters will provide you with data based on predictive analytics for the most relevant of concerns, including property type, strategy, and budget.
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Taking care of Financing
Buy and hold real estate is very doable for the average person, but it is by no means easy to fund by oneself. Some (very few) real estate investors can purchase income properties using only cash. But for the vast majority, obtaining a loan, in one form or the other is the way to go.
The most common way of financing is to obtain a mortgage from a bank. This convention is still very diverse, as there are many types of mortgages out there. Some last for a certain amount of time, others have certain clauses to them, with owner-occupant loans being a great example. The way you finance the investment property matters, so learn more about your situation and get your financing in check when you want to invest in buy and hold real estate.
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Running the Property
Finally, once you have your buy and hold property up, it’s time to have it running. Add amenities and renovations that will boost its value. Find ways to advertise your property and attract tenants. Make sure management is taken care of, whether it’s self-management or by professional property management.
Buy and hold real estate is one of, if not, the best investment strategy out there. It is almost ideal for any time and any situation. For these reasons, we can’t recommend buy and hold properties enough. To get your journey with a buy and hold property kicking off, start your search at Mashvisor, where you can find your perfect property in a matter of minutes!
