Boring Buy and Hold Investors

[Gregory Schwartz]

Where are all my boring investors at? Does anyone else prefer good old buy-and-hold long-term rentals?

20-25% down, duplex, break even on cashflow in a promising area. That's what gets me excited. 

I've done major rehabs, owner financing, private money, partners, out-of-state investing, and Airbnb but still prefer the good ole long-term buy and hold. Even though they make less on paper. 

Am I the only one? 

[Todd Anderson]

I would agree with the buy and hold mindset.  The one thing that myself, and  the investors that I work with have found is it helps to keep those buy and hold properties fresh.

I am working with a lot of investors that are turning their older buy and hold into New Construction, Build to Rent. If you can move the investment of 1-2 SFR into a New Construction Quad, your repair costs go down and cashflow is there day one. You get to own the property for the best years of its life.

The other things that the investors I work with find is with New Construction you can use builder incentives to get a rate in the low 4%.   At this rate that cashflow is there and you can invest in areas that the appreciation is obvious.  

[John Morgan]

Quote from @Gregory Schwartz:

@John Morgan Grand Prairie isnt far from us in College Station! Where are your SFRs? 

I’ve got 18 in the DFW area. And 10 in Arkansas. All “base hits” but they’re starting to score a lot of runs. lol 

[Jake Andronico]

@Gregory Schwartz

Yessir!! The wealthiest investors I know do this. You're not the only one. 

Nobody talks about headache factor or the stress from the extremes of RE enough in my opinion. 

[Shayna Howard]

Quote from @Gregory Schwartz:

Where are all my boring investors at? Does anyone else prefer good old buy-and-hold long-term rentals?

20-25% down, duplex, break even on cashflow in a promising area. That's what gets me excited. 

I've done major rehabs, owner financing, private money, partners, out-of-state investing, and Airbnb but still prefer the good ole long-term buy and hold. Even though they make less on paper. 

Am I the only one? 

I am trying to get into this type of investing myself. I purchased a property originally for myself but have decided to build a duplex and rent it out. on the second half of the property have plans for a 6-unit building.
I am currently, looking for an experienced investor to help me complete these projects.  So, Im hoping to get there soon, I definitely want the comfort of a steady income. 

[Deandre Brown]

New investor here! Since I started in real estate investing, I've researched all the exit strategies and understand that the property often dictates which strategy to use. However, I've been particularly drawn to the buy-and-hold approach. I like it because it offers more predictability with the property, so you have a good sense of what you're getting into. I'm currently building up my reserves, and once that's in order, I'll be ready to acquire my first property.

[V.G Jason]

Go look at almost any physical asset, and almost any soft asset. Buy and HODLing will always reign the best course of action; sell preservation mechanism physical assets on rallies due to turbulence, and buy back in times of peace and ease. Soft assets like specific stocks and preservation phys assets this may not apply to, but you keep those at low % in your portfolio and actively "trade" those. 

These phys assets you have as 93-95% of your portfolio and just HODL. 

[Nicholas L.]

@Gregory Schwartz

hi. i'm here too. although I'm trying to get closer to 0 down, break even on cash flow. BRRRR or seller finance. i can't / don't want to do 25% down payments anymore.

i'm also dollar cost averaging into the stock market.  rough plan: buy in.  wait 25 years.  ignore volatility.

[Don Konipol]

Quote from @Gregory Schwartz:

Where are all my boring investors at? Does anyone else prefer good old buy-and-hold long-term rentals?

20-25% down, duplex, break even on cashflow in a promising area. That's what gets me excited. 

I've done major rehabs, owner financing, private money, partners, out-of-state investing, and Airbnb but still prefer the good ole long-term buy and hold. Even though they make less on paper. 

Am I the only one? 

I guess I’m going “against the tide”.  I don’t do “buy and hold”.
The thing is I'm ALWAYS looking for the highest ROI and most efficient and effective way to build my personal wealth. So this leads to opportunistic buying, selling, and positioning the subject properties.

Let me explain what I mean by specific example.  About 25 years ago I purchased an auto repair facility out of bankruptcy court that had an environmental problem.  I easily solved the problem, entered a 3 year lease with a tenant that provided me with a 20% Annual yield on my invested capital (purchased the property for cash).  The tenant wanted to purchase the property, and we negotiated a price of more than 3 times the amount I had invested.  I sold, BECAUSE (1) I had held 12 + months and so my gain was taxed at max capital gains rates of 15% rather than the 35% I was paying on the rental income (2) the yield on the amount of sale price would’ve less than 7% and (3) I could invest the money at 15% or more. 

Second example: I purchased a first lien note secured by a very run down shopping center in which the principal balance was $470,000 - I paid $255,000 for the note.  The note carried a 7% interest rate for 15 years, so my yield to maturity was 17.7%.  Two years later I offered the debtor a slight discount to pay me off and he took e up on it.  Because of the severe decline in interest  rates he was able to refinance at a low rate. To make the deal happen I had extended a small second lien note to him so he could repair the property enough to get bank financing.  As a result I ended up with a 40% + annualized ROI.
Third example : my partner and I owned a retail center onto which we had placed a $650,000 bank loan at 4% fixed for 15 years.  Rather than continue to hold, or sell for cash, after we had depreciated the property advantageously, (4 years) we decided to sell with owner financing.  We obtained a price $150k greater than we could have in a cash sale, wrapped the existing 4% note into a 10% note bringing the $1,300,000 note we hold to a 16% yield. 

I’m a believer that with sufficient knowledge, and sometimes capital, real estate ownership can be “worked” to obtain an enhanced return on invested capital, WITHOUT increasing risk.   But, it takes a commitment to be an ACTIVE investor.  My plans for the future entail a more passive approach - like BUY AND HOLD.LoL.

I think for most investors buy and hold can work VERY WELL. Those a little more adventurous might try an “enhanced” buy and hold whereas they take advantage of the following
1. Timing purchases in markets that have just suffered unwarranted price declines
2. Timing sales to take advantage of “irrational exuberance” 
3. Purchasing notes at a discount to “capture” the early payoff windfall

For those willing to be more active, engage in study and education, and have the time, wealth building can be accelerated by using techniques such as
1. Mortgage subordination
2. Mortgage substitution
3. Wrap mortgages
4. Property repositioning
5. Options 

The crazy thing is that using the strategies and techniques I have just discussed does not have to increase risk, unlike property development, rehab, land speculation, 80% leverage, or converting residential to commercial.  

As they say “pick your poison” 


So, if you do use “enhancement” to buy and hold to increase return please share with us what you do and how you do it?

[Gregory Schwartz]

@Don Konipol Im always looking to maximize the buy and hold opportunities. But the foundation of the strategy is buy and hold, break even with good equity. Meaning if it doesn't work as a long term buy and hold I dont buy it. 

I have improved units driving rents by 30-40%. I've furnished these rentals to maximize income with midterm rentals. I've purchased properties under market rent and leased them well above market rent without the need to do any renovations. 

These have all accelerated my wealth. The only thing I shy away from is selling :) 

[Don Konipol]

Quote from @Gregory Schwartz:

@Don Konipol Im always looking to maximize the buy and hold opportunities. But the foundation of the strategy is buy and hold, break even with good equity. Meaning if it doesn't work as a long term buy and hold I dont buy it. 

I have improved units driving rents by 30-40%. I've furnished these rentals to maximize income with midterm rentals. I've purchased properties under market rent and leased them well above market rent without the need to do any renovations. 

These have all accelerated my wealth. The only thing I shy away from is selling :) 

Good job!  You’ve found what works for you and it appears that you’ve had great success with it.  Of course there is no absolute right or wrong way.  He individual investor should optimize and choose the trade offs that produce the best results (results meaning more than just financial) with the least risk.  

I personally am almost always willing to sell a property I own if (1) I can created a ultra high ROI by use of seller financing/wrap loan with an existing loan that has a low rate or (2) sell for a low cap rate for a property without great upside potential and can reinvest for a much higher ROI.  I also utilize subordination of the mortgage and substitution of collateral where appropriate to create the “enhanced” returns that I seek.  But that’s probably not appropriate for most investors. 

[Peter W.]

Quote from @Don Konipol:

Quote from @Gregory Schwartz:

@Don Konipol Im always looking to maximize the buy and hold opportunities. But the foundation of the strategy is buy and hold, break even with good equity. Meaning if it doesn't work as a long term buy and hold I dont buy it. 

I have improved units driving rents by 30-40%. I've furnished these rentals to maximize income with midterm rentals. I've purchased properties under market rent and leased them well above market rent without the need to do any renovations. 

These have all accelerated my wealth. The only thing I shy away from is selling :) 

Good job!  You’ve found what works for you and it appears that you’ve had great success with it.  Of course there is no absolute right or wrong way.  He individual investor should optimize and choose the trade offs that produce the best results (results meaning more than just financial) with the least risk.  

I personally am almost always willing to sell a property I own if (1) I can created a ultra high ROI by use of seller financing/wrap loan with an existing loan that has a low rate or (2) sell for a low cap rate for a property without great upside potential and can reinvest for a much higher ROI.  I also utilize subordination of the mortgage and substitution of collateral where appropriate to create the “enhanced” returns that I seek.  But that’s probably not appropriate for most investors. 

 If you're buying single family homes, the transaction costs are high enough that it's usually the right move to buy and hold.

[Don Konipol]

Quote from @Peter W.:

Quote from @Don Konipol:

Quote from @Gregory Schwartz:

@Don Konipol Im always looking to maximize the buy and hold opportunities. But the foundation of the strategy is buy and hold, break even with good equity. Meaning if it doesn't work as a long term buy and hold I dont buy it. 

I have improved units driving rents by 30-40%. I've furnished these rentals to maximize income with midterm rentals. I've purchased properties under market rent and leased them well above market rent without the need to do any renovations. 

These have all accelerated my wealth. The only thing I shy away from is selling :) 

Good job!  You’ve found what works for you and it appears that you’ve had great success with it.  Of course there is no absolute right or wrong way.  He individual investor should optimize and choose the trade offs that produce the best results (results meaning more than just financial) with the least risk.  

I personally am almost always willing to sell a property I own if (1) I can created a ultra high ROI by use of seller financing/wrap loan with an existing loan that has a low rate or (2) sell for a low cap rate for a property without great upside potential and can reinvest for a much higher ROI.  I also utilize subordination of the mortgage and substitution of collateral where appropriate to create the “enhanced” returns that I seek.  But that’s probably not appropriate for most investors. 

 If you're buying single family homes, the transaction costs are high enough that it's usually the right move to buy and hold.

Buy and sell direct or get a license and be the broker….buy cash and eliminate origination fees and other loan costs.     

But in general you’re correct, SFR don’t lend themselves to “enhanced” ROI opportunities as often as commercial real estate.  

[Eric Pratt]

I am breaking into the real estate investing game and I find this strategy very attractive.  I would love to learn more how to start from zero and buy properties with a long game mentality.  I believe the buy and hold strategy is a great and beneficial one.

[George Red]

Ditto, good'ol buy and hold properties. I need to practice patience as I'm at the point where I'm just about out of funds for downpayments and saving up enough for 25% down doesn't go as fast as I'd like. I'm aware of private money etc. but I've jumped into the pool of real estate but most around me are not as ready to jump in as well.

Presently evaluating refinancing to take my downpayment money out of one property (at that point it feels like a "free" property) and balancing if I should focus on aggressively paying some properties off or keeping leverage... classic dilemma I guess.

[Gino Barbaro]

@Gregory Schwartz

I'm here. I love boring. It's amazing what you can accomplish buying one or two deals a year of boring cash flowing deals.

Most investors don't have the patience or the discipline to buy an asset, and manage it and hold it for long term. We've been taught velocity of money is the way.

I still own assets from 2013 and they've 4x in value, along with the rents. 

It's not to say you can't be flipping and rolling money into boring assets. Great way to leverage tax benefits and build wealth

[Joe S.]

Quote from @John Morgan:

Quote from @Gregory Schwartz:

@John Morgan Grand Prairie isnt far from us in College Station! Where are your SFRs? 

I’ve got 18 in the DFW area. And 10 in Arkansas. All “base hits” but they’re starting to score a lot of runs. lol 

Are you still buying in Arkansas? I thought about buying there before, but I do not have reliable boots on the ground there.

[Tom Thomson]

Love this. Started doing this in 2018 and have built up to 16 properties now. Tried a couple flips and decided quick that was not my game. I love to purchase simple 3/2 homes that are a little older in good areas with somewhat newer mechanicals, HVAC, Roofs, etc. so I sleep well at night. Average tenant stay for us has been over 3 years and we by in the Indianapolis Indiana area. Average home value in our portfolio is about $175 to $185K and average rents around $1600.00 (Yes not at the 1% rule). On average we get about $500 per month over our PITI payment per month so all of them cash flowing well. The best part has been the steady flow of income, home price appreciation, mortgage paydown, tax benefits, and just the overall enjoyment of building a portfolio that continues to add to our goal of financial independence. Love the buy and hold game!!!!

[Stephen Keighery]

The boring investments get me excited as well. I don't like the 20% down model, I prefer to BRRRR and then sit on that boring investment with little to no money in it.