Property Investing Strategies
Buy and hold Property Investing Strategies.
Property investment is not as straightforward as you think it is. You can choose from many different methods, approaches and strategies, and whilst one way may appeal most to one person, it may differ from what another is looking for.
One of the property investing strategies that you can choose to implement for your investment is a buy-and-hold property. But what does this mean, and why might it be your right strategy?
What is buy-and-hold property investment?
As the name suggests, you buy a property and then hold on. There will be an intention to sell it later on down the line, but for the first part, you will want to utilise it for a shorter-term cash flow.
The property will be rented out before it is sold, and then, over time, the property will increase in value (or the mortgage may be paid off on it to help with this), and then it will be sold later on down the line.
Why choose to buy and hold?
There are several reasons why a property investor may choose a buy-and-hold property for their investment.
The first is because it provides them with a monthly recurring rental income. Sure, there is always a chance that the tenant might move out, which leaves you without rental income, but equally, you may find that they stay in there for the whole time, and you can reinvest the money you make from the rental income. This will build up your wealth over the long term, which will always be a better idea for you when it comes to making more money.
Another reason to buy and hold could be linked to the property market and inflation. When you rent out a property that you one day intend to sell, you will be able to watch what the property prices are doing and see when might be the right time to sell.
This will also depend on your tenancy agreement length with your tenant, but if you keep this to a shorter time frame, you will find that the prices have gone up, and then you can always decide to sell.
Finally, with buy and hold, you can also benefit from significant tax benefits if you look into the options.
Things to think about
Just like with many investments, whilst there are many positives to choosing to buy and hold, there are also some drawbacks that you may need to keep in mind.
The first is that when you are holding onto the property, you will manage it. You will need to keep on top of the tenants (unless you sign up with a property management company to take care of this for you) and any issues with the property while they are living in it.
It is also essential to recognise that you must consider how long it can take to sell a property when you decide to do so. This can take some time, and in that time, there may also be no rental income coming in, which will leave you out of pocket.
Before you do decide to take on a buy-and-hold property, take the time to think about what your long and short-term goals are and whether or not they are a realistic plan. You should look at trends in the past and consider what is likely to happen in the future; that way, you can plan and think about what will work for you.