What Is Buy And Hold Real Estate Investing?

You may recognize the term "buy and hold" as a stock market investing term. It refers to when you buy a stock or another asset and keep it in your portfolio through market highs and lows. Buy and hold real estate involves the same basic concept.

Learning more about the buy and hold strategy can help you better assess whether this real estate investing technique is right for you.

What Is The Buy And Hold Strategy In Real Estate?

The term "buy and hold real estate" refers to a specific investment strategy where investors purchase property and retain it for a long period of time, often several years or decades. The investor rents out the property and collects rental income. Over time, the property’s value may increase, allowing the investor to eventually sell it for more than they paid for it.

Ultimately, the buy and hold strategy is a long-term approach to investing, unlike purchasing real estate only to sell it again soon afterwards. In a buy and hold real estate situation, you might even hold onto a property for your kids or grandkids someday to bring them rental income or even the proceeds if they decide to sell the property.

Buy And Hold Real Estate Vs. BRRRR

Besides buy and hold investing, you may also want to consider the BRRRR investment strategy (Buy, Rehab, Rent, Refinance, Repeat). This type of real estate investing involves flipping a distressed property, renting it out and getting a cash-out refinance for more rental property investments. A cash-out refinance allows you to pay off the original mortgage with money from your new, larger loan, then take the difference between the two mortgages in cash. From there, you can use the cash to buy a new distressed property and start the process over again.

How They Differ

The biggest differences between the buy and hold versus the BRRRR process is that in the buy and hold process, you hold onto the property, whereas in the BRRRR process, you don't. Furthermore, with the BRRRR, you continue to purchase new investment properties after the work on the current one is complete.

However, in both strategies, you evaluate to make sure you're buying the right investment, monitor housing trends and in both cases, may eventually sell your real estate investment.

How Does The Buy And Hold Real Estate Strategy Work?

The buy and hold strategy involves browsing and comparing investment properties, buying a property, renting out or managing the property, monitoring market trends and determining when to sell it.

When done effectively, buy and hold real estate has the potential to give you a continuous source of income, possibly even through retirement. In contrast to fix-and-flip properties, they may offer a steady, consistent return over many years.

What Type Of Properties Work For Buy And Hold Real Estate?

Any type of property can work well for the buy and hold strategy, but it’s often wise to find a property that is expected to increase in value over time. For example, you might consider buying a property in a developing area.

Pros And Cons Of Buy And Hold Real Estate Investing

Whether the buy and hold strategy fits your goals will depend on whether the pros outweigh the cons, so consider both.

Pros 

Let’s explore some of the benefits of buy and hold real estate investing.

Regular Income

Buy and hold real estate has the potential to provide you with regular income for years. As long as you continue to have a renter, you can expect to collect regular income from your investment. That said, keep in mind that you’ll need to factor in the expenses of maintaining the property.

Potential For High Returns

When you decide the time comes to