Whether you are new to real estate investing or an investor with tons of experience, the buy and hold strategy will always make sense, if chosen in a strategic location with proper due diligence. Conducting proper due diligence minimizing the risk of incurring unexpected expenses which might affect your profit.
What is Buy & Hold?
Buy and Hold is an investment strategy in which the investor buys a real estate property in a prime location and holds the property for a long period of time to generate steady cash flow.
The Advantages of Buy and Hold in Real Estate Investing
Appreciation is an increase in the value of a property over a period of time. If you buy a rental property in a prime location, the real estate property’s worth is bound to increase over time, if all else is equal. Land is a great example of an appreciating asset because it has an indefinite useful life and it will always be in demand. In simple words, the buy and hold strategy will allow real estate investors to make money from their investment properties in the long run.
2. Tax Perks
Real estate investors are granted tax advantages for buying and selling real estate. For one, you can write off the cost of depreciation from your tax savings and in turn, save money from your rental property ownership.
Expense deductibles in the buy and hold strategy include but are not limited to:
- Mortgage loan interest
- Maintenance and repair expenses
- Legal and accounting expenses
- Educational expenses related to real estate investments
- Travelling expenses for repairing and managing rental properties
- Property taxes
3. Steady Income
The best perk of all in the buy and hold strategy is the steady (and passive) rental income which landlords receive on a monthly basis. Selecting the right tenants is crucial to maintaining a stable source of rental income from your real estate business.
4. Financed and Leveraged
The buy and hold strategy in real estate investing does not mean exhausting your savings funds to get into the business. Financing your investment property with a mortgage loan on the house not only gives you high leverage, but you can build up your home equity and gain 100% home ownership.
5. A Hedge against Inflation
Owning real estate through the buy and hold strategy is a great hedge against inflation and is a way to protect your wealth during those times.
6. Long-Term Financial Security
The buy and hold strategy in real estate investing is a long-term one and it has the potential to secure your retirement funds and be a stable and consistent source of income for many years. This strategy gives investors the financial independence and security to live a comfortable life and enjoy a happy retirement.