How to Buy and Hold Real Estate

Buy and hold is a real estate investing strategy that aims to achieve both short-term

cash flow and long-term appreciation. The cash flow generated by rental income can

pay off the mortgage and put money into investors’ pockets while the property value

appreciates over time, allowing investors to profit when they decide to sell the

investment. Buy and hold real estate can be one of the best ways to build a

diversified portfolio.

The process of purchasing an investment property is similar to that of a primary

home you intend to live in yourself. In both cases, a lender will look at your assets

through underwriting. The lender will want to see your proof of income (tax returns

and pay stubs), credit documentation, proof of assets and liabilities, titles of transfer

and gift funds, and more.

Most investment properties are bought with financing, so you must be able to qualify

for a loan in order to purchase a property. The lender will also need to understand

your investment goals and whether you are seeking a short-term or long-term return

on your investment. The more information you can provide about your investment

goals, the more likely it is that a lender will be able to approve your loan application.

While flipping offers a quick turnaround on your investment, it can be expensive and

requires a lot of work to manage. In contrast, a buy and hold investment property

can yield a passive monthly income and offers a number of tax advantages. For

example, rental property is a tax-favored asset class in the U.S. and you may be able

to deduct some of your operating expenses and capital improvements. A qualified

tax accountant can help you determine the specific deductions available to you

Buy and hold investments can also be a good inflation hedge. Over time, rental rates

typically rise by at least the rate of inflation and can increase your investment

income. However, it is important to note that this type of investment can be more

volatile than other types of investments.

When investing in a buy and hold property, it is critical to find an area with strong

demographics and rising population growth. This can help ensure that there is a

steady stream of potential tenants and reduce your risk of vacancy rates or

depreciation. The booming job market in these areas can also increase your rent

rates and appreciation rate, which can improve your overall ROI.

Unlike speculative investing, which relies on trying to beat the market, buy and hold

real estate is a passive investment strategy that provides you with a steady stream

of income and long-term wealth building opportunities. This is why many investors

skew towards this investing method and why it has been historically a great recipe

for amassing wealth in the U.S. and around the world. In addition, buying and

holding a piece of property for a long term period is a safe way to diversify your