What is Buy and Hold Investing?
Real estate investing Buy and Hold is the process of buying or acquiring a property with the short-term aim of renting it out and then maybe selling it in the future. Whenever we discuss real estate investment option over any other investment options like stocks of 401k, the most important benefits which we notice and talk about are the Rents and Tax deductions. It is exactly what this process of Buy and Hold Investing implies.
This process is very advantageous for people who are looking for long-term gains. Some of the benefits which we acquire from this are Rental Income, Tax Deduction, Rise in the price of the property while we plan on selling it. Whenever we buy a property, we can rent out that property and enjoy the rental income from it. The depreciation that we face because of the properties damage helps us to get tax deductions and eventually if we take care of certain factors that we will discuss in the later part of this article, the price of the property also goes up thereby helping us to earn profits when we finally decide on selling that property. Do you notice how it is all a cycle? From buying the property to finally selling it after a long interval. All the financial gains in between are profits for us.
While we enjoy the gains or benefits from this process of Real Estate Investing buy and hold, some factors which make it a success and which we should keep in mind while we buy a property are the following:
- A Good Neighbourhood – By this what we mean to say is choose the area where you buy the property wisely. Ensure that it is a residential posh area or at least a space which is worth living in with good people already staying there.
- An area where rates are going to rise – Also ensure that you do your own due diligence and market study before you buy a property. Always make sure that the rates in the area where you buy the property, the rates are going to increase in the future.
- Type of property – the type of property that you buy also matters. Whether it is a multi-storey building, single family or multi-unit property,etc. all these factors add to the ultimate rental amount of the property and eventually your financial gains.
Also the opposite of buy and hold which is Buy and Sell is gaining some popularity. This process is, however, better for investors who are looking to earn quick profits. In this, the investor buys the property and then sells it after making some changes or doing some renovations.
Eventually, no matter what you do. Real estate investments always give its investors multiple opportunities to benefit from it.