Real estate investment is one way to earn continuous cash flow on the side, or as a full-time income. With the concept of buying and holding residential properties, most investors focus their efforts on buying properties with the possibility of earning a passive income each month. We can also refer “buy and hold” to the “buy-to-rent” strategy.
Let’s dive into the strategy behind buying and holding properties. It is a process of buying properties at a very low cost, fixing and repairing them, and then waiting for the right time to sell it off at a much higher market price.
While waiting for the market price to improve, many real estate investors will choose to rent out the property to earn a monthly income from possible tenants. This extra monthly income can be a great source to cover mortgage payments or for the maintenance/enhancements of the property itself. When the mortgage has been fully paid, the investor can then sell the property as a full rightful owner. Otherwise, the investor has the option to continue renting out the property and make a certain income this way.
Buying and holding can be extremely profitable if done properly. Here are the advantages of buying and holding properties:
A decent monthly income can be generated by renting out the property being maintained and held by the investor. Aside from the fact that the value of that property appreciates over time, the chance for ROI plus profiting from higher value of its sale is very feasible.
The advantage of writing off the value of your property over a period of 27.5 years is possible if the investor remains active during that period. (See Tax Reform Act of 1986)
Statistics show a trending fact for real estate consistency in its value appreciation over the past 40 years. Investors tend to hold their properties longer to gain much higher equity, better ROI, and higher profits when they are ready to sell.
As inflation rates rise, investors who own real estate that is tied up with the inflation rates will benefit from the increase in the value of their properties.
As the demand for rental properties increases, landlords and investors who own properties may have the authority to raise monthly rent prices charged to their tenants. This can be an extremely good way to increase income; however it’s important to charge fairly and with fair warning for tenants to abide by the landlord-tenant agreement.
There are various ways to enter into real estate investment! To discover and start benefiting from its many advantages, you can find additional help from our blog section CPD Homes which includes topics such as achieving a lifelong income, how to start in real estate and investing with no budget!