“Do I buy and flip real estate or buy and hold real estate?”, the question every real estate investor comes across with every investment property purchase. While it is true that to flip a house offers you a lump sum of positive cash flow faster than the buy and hold real estate investment, buying and holding investment properties provides the opportunity to grow your net worth more so than just selling your real estate property fast.
Let’s consider the following story. Two different real estate investors buy an investment property in the same year. Investor A purchases an investment property with the strategy to make money quickly through a quick buy and sell investment property (fix and flip). Meanwhile, Investor B has a buy and hold real estate strategy in mind. Investor B is planning to make money through long-term appreciation and rental income. The new year is upon them, and both real estate investors want to purchase new properties. The difference between the two is that Investor A is starting from scratch, and Investor B is expanding his real estate investment business.
Talk to any investor and he/she will tell you that he/she only regrets the properties that he/she has sold. The opportunity to make money through a buy and hold real estate strategy can come in many different forms: some from cash flow, others from tax savings, and even some by manipulating the real estate housing market in your advantage. Here are 7 methods that can make money for you as a real estate investor by utilizing the buy and hold real estate strategy.
Like any other market, the housing market experiences trends of highs and lows. Since the 2007 housing market crash, the housing market has experienced appreciation. By understanding the trends of the real estate market of interest, you are able to take a calculated risk in the right investment property letting you benefit from the current market conditions. However, as fast as appreciation can occur, so can depreciation. Cities that experience the majority of their revenue from one major industry are unstable and hard to predict. For example, the economic growth of an oil town can boom just as quickly as it can crash. You can utlitize Mashvisor property search engine and investment property calculator to find the best investing location for you.
Real estate investment is a form of passive income. This is due to the fact that people will constantly require shelter. The buy and hold real estate investment strategy affords the investor monthly passive income. When owning a rental property, the real estate investor will acquire positive cash flow from the tenants rental payments, while decreasing the principal price of the real estate investment until full ownership is had.
When working on a long-term investment strategy, it is important to realize the tax deduction benefits that can be had. With the taxing system getting more stringent, a few tax breaks here and there are a way of saving the investor money. Tax cuts come from many avenues when investing in a buy and hold real estate strategy. Mortgage interest costs, property taxes, and private mortgage insurance as well as any state offered tax credits (for example, sustainable energy initiatives like solar panels on the investment property’s roofs) can offer the investor tax deductions when owning investment properties.
Benefiting from Inflation
There is a direct relationship between land and real estate property. In most major cities, the amount of real estate property is limited. Inflation in the real estate market will happen when an increasing demand in the housing market occurs. Investing in a buy and hold real estate strategy offers the investor the opportunity to make money in the long term through the appreciation the housing market gains.
Increasing Rental Cost
There is an opportunity to make money in every city experiencing steady growth. Such cities are experiencing an increasing demand for a rental property. The opportunity to buy a real estate investment is becoming less feasible as more families are unable to buy investment property, creating a more competitive rental market. This gives the real estate investor an opportunity to make money through increasing the rental cost on his/her buy and hold real estate property.
Buy and hold investment properties give the real estate investor the prospect to make money well into his/her retirement years. Since cash flow increases as the principle mortgage decreases, investment retirees can live comfortably well into their golden years. Buy and hold real estate gives the investor the opportunity to make money without spending much of his/her time and effort in a more hands on money making situation.
Every real estate investor enters the housing market with an understanding that the investment is either a short-term investment opportunity or a long-term investment strategy. Regardless, the exit plan is nice and simple for every investor to comprehend. Accept the appreciation that has been accumulated on your investment property and go. It’s the simplest money making strategy to understand.
There are many money making strategies used when investing in real estate properties. Buy and sell investment property. Buy and hold investment property for the purpose of passive rental income. Using the appreciation gained on your real estate investment over the years to make money. Or simply all three combined together. There is no wrong answer. Every real estate investment strategy has its own pros and cons. However, at the end of the day the long-term investment strategy has the best return on it. The opportunity to grow your net worth through the long-term investment strategy is diverse. Passive income through rental property, making money through tax deductions, and appreciation values from the real estate housing market are a few of the ways used to make money with buy and hold real estate investment.
Real estate investing can be an overwhelming experience. Luckily, at Mashvisor we have all the tools and information that are required to become a successful real estate investor. Feel free to browse through the website and take advantage of all the features that we have for you. For all things real estate, visit Mashvisor!