Buy and hold real estate is a strategy most successful investors use during tough economic times. If you were to compare buy and hold investing with say a flipping strategy, you’d need a longer time frame to realize your goals, but its well worth the wait. This strategy will make you a lot of money if you plan and work the deal appropriately.
First, let’s describe how you execute this strategy. The idea is to buy a property at below market value, and profit from the appreciation of the property as the value rises over the years. In most cases, it takes a few years to realize considerable gains. Contrasting that with a flip strategy, you would purchase a property with the immediate intent to fix it up and sell it for a higher amount. The caveat is you may not be able to sell the property for the amount you’d like, so you may end up buying and holding it anyway.
Now that we know what the strategy entails, let’s discuss the reason it works well during distressed economies. When the housing market is in turmoil, property values become very low. Prices are generally well off their all time highs. This means the real estate investor can buy and hold real estate over a number of years and realize a profit. Simply put, there’s room for the value of the property to grow. If you made the mistake of buying the property at its’ highest value, you’d have to ride it down and wait for it to return to previous highs, or take a loss. Your investing time horizon and threshold for losses will help you make your decision.
Another benefit gained from this strategy is you can receive monthly rental income while the home is rising in value. To some investors, this more than offsets the time required to realize a profit through appreciation. Hopefully this article makes your choice of strategy clear for investing during tough times. Every strategy has its’ time in the sun. You should look to buy and hold real estate when property values are depressed.