Buy & Hold Investing
Buy and hold investing in real estate is for people who would like to purchase a property and hold on to it for years.
Buy and hold investments can include rental properties, commercial buildings, second homes, and/or self-directed IRA real estate investments.
The benefit to buying and holding real estate lies primarily in the appreciation and rate of return, which is multiplied, thanks to leveraging.
For example, if you received identical annual returns on your stock portfolio and your real estate holding, 8% as an example, you’d still come out way ahead with a real estate investment. Why? Because if you use real estate financing, you wouldn’t have invested 100% of the price of the real estate, only the down payment.
As an example, if you had a stock portfolio with $100,000 in it, and it appreciated by 8% a year, at the end of the year, you would have received an $8,000 bump, or an 8% rate of return on your money.
But if you used that same $100,000 as a down payment on a real estate investment, which would enable you to buy a $500,000 property, and the property appreciated at an 8% rate, at the end of the year, you’d have $40,000 in equity, or a 40% rate of return on your money.
Even if the property doesn’t appreciate, but stays flat over the years (with its appraised value not rising or falling), in 15 or 30 years (depending on the terms of your loan or mortgage), you still would have paid down the loan and would own the property outright.
Many savvy real estate investors use buy and hold strategies to acquire properties that provide them with a positive income stream today, as well as potential retirement income.
For more information on buy and hold strategies and other real estate investing tips, sign up to watch this free real estate investment webinar.
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