Buy and Hold Real Estate is the best strategy for investment in residential property. But it will help you more if you are having plans for a long-term investment. It might be helpful in short-term investment and provide you with a profit, but in rare cases, it literally depends on the real estate market of a country.
If you look at the real estate industry, there are many reasons people want to invest their savings. If an investor with a small amount of capital wants to grow financially, this industry offers the best investment strategies.
But the strategy we are going to discuss in our article is for those real estate investors who have large equity to invest and are financially stable enough to buy and hold property. If you need more guidance in real estate and investment concerns, contact the leading marketing firm Makaan Solutions, or visit our website.
What is Buy and Hold Real Estate?
Buying and holding real estate property is the best technique in which you buy a property and hold it for a longer time period. In this case, the investor can benefit from the property while holding it; the investor can consider the property as “rental property”.
This strategy helps the buyer; like earn cash from your property, and you can hold your property for a longer period as you are continuously earning from your asset. The strategy of buy and hold real estate helps you to realize the best time to sell your property at a larger amount than you invest.
In the real estate industry, it is the most common investment option which will provide you with a short-term cash flow as well as with long-term greater and satisfactory results. The best part of this strategy is; that you can pay your mortgage from your rental income. On the other side, your property increases its value.
Buy & Hold Real Estate “Long-term Vs Short-term”
The long-term and short-term buy and hold real estate means for how long you are holding your property. That time period decides whether it was a short-term or long-term investment.
The short-term buy and hold strategy is when an investor buys a property and holds it for less than 5 years. It will require more cash to invest after purchase because investors buy and spend money on maintenance. Moreover, they wait until the prices increase and sell their property within 5 years. In the long term buy and hold real estate; investors are committed to holding their property for the long period.
This strategy helps them to fight instability and fluctuations in cash flow. Moreover, they earn from their property in the form of rent for a longer period because rent increases yearly. In fact, they can also gain a huge profit from their property after 5 to 10 years.
A long-term buy and hold real estate strategy is the best option as compared to Short term buys & hold real estate when you are financially stable and want to enjoy continuous earnings monthly.
How to Buy and Hold Real Estate in 2023?
Buy and Hold Real Estate is basically a long-term investment strategy that you need to be very careful with it. It is not like a flipping investment property; you will have to value your property for high rental income as an investor. Moreover, market research is crucial before making an investment.
You should consider the property market in order to know about the population growth and higher home appreciation rates. For example, buying a property in a booming period is a good investment because people will have money and they will be able to pay the higher rent. In real estate terms, it is the green light to make an investment.
In this, you can hold your property for a longer period without any fear and hesitation because it is the booming period in real estate that lasts a bit longer.
However, the following are the crucial factor:
- Check the market do people have jobs and are financially stable
- What is the population growth
- The homeownership rate in the area
- Property current rates
- Property tax rates
- Restaurants and Malls
Some essential factors for buying a property
Buy and hold real estate strategy require you to keep the following factors in mind while deciding on a purchase:
Check the Property Condition
This is the crucial factor you should take into account and visit the building personally to check the condition. Moreover, it is not the buy-and-flips property investment strategy because you prefer to buy a property that needs less maintenance; you should rent it out and start earning a stable monthly income.
Add Value to your Property
It is an essential strategy to gain the attention of people who are looking for rental properties. You need a bit of renovating of your building after purchasing. It will add value to your property when you update floors, kitchen & bathroom hardware, the landscape, and painting.
The last but not least step is to have a good tenant after you have made all your efforts in buy and hold real estate techniques. You have a number of ways to find a tenant. Moreover, you will find a tenant easily if your property is located in a prominent location.
You can also use your social media account or contact the local real estate agent who rents your property.
What are the Benefits of Buying and Holding Real Estate Property?
There are several top benefits that encourage investors to buy and hold real estate property. Moreover, it is a long-term real estate investment opportunity that is safe and risk-free, helping you to face real estate fluctuations and pay your taxes.
High ROI Strategy
This real estate investment strategy offers a high Return on Investment (ROI). Your investment in the market will increase its value with time. However, you can also benefit from your investment in selling your property after a period of time. There is also a stable income for you from holding your property.
Hedge Against Inflation
Buy and hold real estate properties is a long-term investment in real estate because it has historically served as a hedge against inflation. We know that housing prices rise faster than the rate of inflation according to the annual inflation rate that is measured by the Consumer Price Index (CPI). The investors can earn a handsome amount of money in the form of rent from a tenant.
For example, the US inflation rate from 2001 to 2020 was 41.26%, while the median sales price of homes increased by 238%.
The “property appreciation long-term” is also a source of potential benefit for investors because property value increases once they buy and hold real estate property. Moreover, the value of a property depends upon the inflation in the market, increased job opportunities, and other development near your property.
This real estate long-term investment opportunity has a number of benefits including unique tax advantages. The following are some of the most appealing benefits:
- Deduction of the operating expenses from the tenant such as management fees, repairs & maintenance, insurance, and property tax.
- The property owner can deduct mortgage interest from the renter.
- The Capital Gain Tax (CGT) can be deferred
- There is a pass-through deduction of up to 20% of net business income for investors who have qualified business income (QBI)
What are the Drawbacks of Buying and Holding Real Estate Property?
We know that every investment strategy has potential benefits and drawbacks. Similarly, buy and hold real estate has some drawbacks that are listed below:
You can easily sell different types of assets. However, you need significant time to sell real estate because this process takes time like proper documentation, transfer, and NOC from the concerned department. It is crucial to selling your property within a month if you need finance on an urgent basis.
Property management is all about the maintenance of your property. It is possible that your tenant can demand emergency repair or maintenance at midnight. Being an owner of a property, you will be responsible for each repair of your property.
You must consider different market cycles like recovery, expansion, hyper-supply, and recession when you buy a property for resale purposes. The property value will be different according to these market cycles. You need to wait for the right time to boost property value that is beneficial for you.
Buy and hold real estate is ultimately a good decision for financial growth. However, there are different challenges in this investment strategy to attain a profit. This comprehensive guide about purchasing and retaining real estate property is very helpful for you to make a decision. It is a fantastic opportunity to purchase your residential or commercial properties in different societies such as Faisal Town Phase 2 and Capital Smart City with the help of Makaan Solutions.
A Complete Guide to Buy and Hold Real Estate in 2023
If you want to know about Best Strategy for Investors to Buy and Hold in Real Estate? Contact Makaan Solutions. Our Sales Executive Officer will provide you with all the latest information. Starting from consultation to choosing the property, and from booking to owning your dream property. For further details, please do not hesitate to contact us with the below-given information: