Real Estate Buy and Hold Strategy: How It Works & When to Use It

So as to invest in real estate, you need to have the right strategy in place. A strategy that will lead you towards achieving your financial goals and that will make your investing endeavors lucrative and profitable. Naturally, different people employ different methods, simply because there are various ones and not all of them align with the same kinds of goals. So, it’s no wonder that you and your friend, for instance, may have different ideas when it comes to the right ways of investing in real estate.

Anyway, regardless of what it is that you have in mind when you first start toying around with the idea of investing in real estate, here is the truth. You will have to learn more about that whole process and about the opportunities that can arise on the market, so as to understand how to grab those opportunities and how to take advantage of the market situation. In short, you have to learn how to invest the right way, make the profit you’re after and basically achieve those financial goals you have set.

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Furthermore, you will need to learn about some of those different types of strategies that I’ve mentioned already. Sure, some people rely on one of the methods, others rely on different methods, and there’s no doubt that you’ll find the one that works for you perfectly. The truth is, though, that you can’t exactly make an informed decision about what it is that works for you perfectly if you don’t explore some of those methods in more details.

For example, you can’t know whether the buy and hold strategy is one you should use or one you should ignore, if you don’t even understand what it is and how it works. If you’ve already joined the world of real estate investment, there is no doubt in my mind that you have heard of this specific strategy. But, chances are that you don’t know much about it and you are here now because you are ready to learn. Even if you haven’t heard of this particular method before, the very name can give you a hint about what it entails, but remember this. It is nothing more than a hint, so don’t make the mistake of thinking you know everything if you get the logic behind the name of the strategy.

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How Does the Real Estate Buy and Hold Strategy Work?

Instead of falling into a kind of a trap and telling yourself that you know pretty much everything and that you, therefore, don’t need to learn, what you should do is take time to learn as much as you can about this strategy, so as to ultimately figure out whether you want to use it. As you’ll see, of course, understanding this real estate investment method really isn’t that difficult. Yet, you have to carefully think about it and take some time to decide why it may be right and what kinds of benefits it may bring to the table, before making any final decisions on whether to use it or not.

The process is further explained here:

Basically, the strategy of buying and holding consists of you buying a property and then holding it for a while, so as to capitalize on appreciation, while all the time earning profit on rent. You become an investor, as well as a landlord. So, you provide yourself with the opportunity of building wealth and earning quite a great ROI in the future, while also being set in the present, given the rental income.

How does the entire process work, though? It’s quite simple. First, you carefully assess different properties based on their locations, rental demand, potential for appreciation and general market trends. And then, you choose those properties that have the potential of building long-term value, as well as provide you with a good rental income.

If you are in need of some financing solutions, explore them, decide on the best one for you and then use it to acquire the properties you’ve chosen. From here, you start the process of being a landlord and earning such passive income, holding the property for a long time, with the ultimate aim of profiting from appreciation at one point or another. Of course, the rental income will be taxed at a lower rate than employment income, which is also a benefit you should undeniably consider when getting to know this strategy.

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When Should You Use It?

So, you’re sure you want to invest in real estate, but you’re not sure whether you should use the buy and hold strategy? That’s completely normal. After all, there are different options out there and you want to be sure that you’re using the one that’s right for you.

When is this one, thus, right for you? Well, there are various scenarios when it might be right for you, as well as reasons why you should do this. Let me tell you a bit more about those right now, so that you can figure out if you’re in the right situation to employ the buy and hold solution.

First off, this strategy is suited for those investors that have long-term goals in mind. Thus, if you’re looking to earn some quick cash, it is not the solution for you. On the other hand, if you’re looking to build wealth over time, then it is definitely the perfect option.

Furthermore, if you’re also on the lookout for consistent cash flow, the buy and hold option is the one that will help you achieve it. How? Through the rental income, of course. Therefore, if passive income is something you’d like to secure for yourself, this strategy could be right for you (read more on whether it may be right).

We can’t fail to mention that checking the market situation is also important for deciding if you want to buy and hold or not. Favorable conditions should impact the decision. So, if properties have the potential of appreciating steadily, while rental demand is strong, those count as favorable market conditions and you should definitely consider buying and holding as your investment strategy.

Charu decided to unite her Honors Degree in New Media and lifetime of geekiness to pursue a career in tech and gaming journalism. You can usually find her writing about a variety of topics and drooling over new gadgets and games.