Are you interested in real estate investing, but are not sure where to start? The buy and hold strategy is one of the most popular strategies for beginners, and can be a great way to get your feet wet in the world of real estate investing. This article will provide a primer on the buy and hold strategy, outlining its basics, advantages, and disadvantages. Whether you're a seasoned investor or just starting out, this article will give you an insight into the buy and hold strategy and help you decide if it's the right investment strategy for you.
Advantages of Buy and Hold Investing
The buy and hold strategy is an attractive approach to real estate investing for many, as it offers a number of advantages. Some of the advantages of buy and hold investing include:- Potential for passive income stream through rental payments;
- Potential tax benefits;
- Potential appreciation of asset over time;
- Lower entry cost compared to flipping properties;
- Easier management compared to flipping properties.
This income stream can be used to cover the costs associated with purchasing, owning, and managing the property. Additionally, there may be potential tax benefits from owning a buy and hold property. The lower entry cost associated with buy and hold investing compared to flipping properties is another attractive aspect of this approach. By investing in a property and holding onto it, investors can avoid the costs associated with renovating and reselling a property. This makes buy and hold investing more accessible to those on limited budgets. Finally, buy and hold investing is often simpler to manage than flipping properties.
Instead of having to manage a renovation project, investors only need to manage the rental process, which can be done with the help of a property manager.
Disadvantages of Buy and Hold Investing
The buy and hold strategy is an attractive option for many real estate investors, but there are some drawbacks that should be taken into consideration. Some of the disadvantages of buy and hold investing include:Higher upfront costs. Purchasing a rental property involves a larger initial investment than other real estate strategies. This includes the down payment, closing costs, insurance, and any repairs or renovations needed to make the property rent-ready.Ongoing maintenance costs
.As an investor, you’ll need to regularly maintain your rental property in order to keep it in good condition for tenants. This can include things like mowing the lawn, painting walls, or repairing appliances.
Risk of vacancy
. When you own a rental property, you run the risk of it sitting vacant for long periods of time if you don’t have renters. This can put a strain on your cash flow and eat into your profits.Difficulty finding suitable tenants
.Finding reliable tenants who can make timely rent payments is essential for success in buy and hold investing. You’ll need to dedicate time to screening potential tenants and verifying their financial backgrounds.
Longer timeline for realizing returns
. Unlike flipping houses, buy and hold investing has a longer timeline for earning returns. You may not see a return on your investment until months or years after purchasing the property. The buy and hold strategy is an attractive option for real estate investors looking for potential appreciation with steady rental income.Before getting started, it's important to do your research and understand the legal implications of owning rental property in your jurisdiction. With careful planning and research, buy and hold investing can be a great way to build wealth over time.
