5 Reasons to Buy and Hold Rental Properties
It’s known as “buy and hold” investing. You buy property (or multiple investment properties) and hold onto them for long-term income gains. In most cases, these units are rented out and can provide a steady monthly source of income. Buy and hold investing is different from “fix and flip” investing, which is flipping houses for a faster profit. One is a short-term approach and the other is a long-term investment strategy. Both have their advantages and disadvantages, but both can make you a lot of money if done right.
Let’s take a look at some of the best benefits and reasons why you would want to buy and hold rental properties in your investment portfolio:
1. Real Estate is a Great Investment
Real estate is generally considered one of the best investments you can make. The market is much less volatile than the stock market and other investment opportunities. The long-term gains of real estate ownership are typically very dependable.
2. Steady Income Source
As we mentioned, renting out your investment properties will provide a nice source of income. Whether you own one unit or several, you can keep pulling in money month after month. Ideally, you will keep the unit(s) filled with quality tenants and the rent price should cover your ownership costs, while also providing a little profit each month. Over time, a well-managed income property can make you a lot of money.
3. Property Appreciation
Another long-term benefit of buy and hold investing is the property appreciation. Most houses go up in value over time. There may be market shifts and periods with ups and downs, but you can ride those out if your rental is consistently occupied. Eventually, the property value goes up while you are paying off the cost to purchase it. You can decide to sell later and cash out all that equity or let it keep growing while the rental income continues to be worthwhile.
4. Investment Diversity
Some people buy and hold rental properties as a full-time business. Others may just own a second home or two that they rent out. Real estate ownership is a strong investment and a good way to diversify your overall portfolio as you save up for retirement and look to achieve financial independence.
5. More Flexibility
One advantage of buy and hold investing compared to the house flipping strategy is that you have much more flexibility. You can raise rent prices when appropriate or decide to sell if/when the market is hot and the prices are at their highest. Fix and flip investors are on a tighter timeline to renovate the property and then resell it as quickly as possible to recoup their expenses. They are more susceptible to changing market conditions. Buy and hold investors can make moves when the timing is right.
These are some of the advantages of buy and hold investing. If you want to get the most out of your real estate investments, join the PropertyLark home buying network. We offer specialized resources and tools to help you maximize your investment opportunities in today’s market.