Buy and Hold Real Estate FAQ

Rental real estate investing, also known as buy and hold investing, is a smart and effective way to diversify your portfolio. If you are exploring buy and hold real estate for the first time, read on to get answers to some of the most commonly asked questions about rental real estate loans, investment benefits, tax benefits, and more.

How is buy and hold investing different from house flipping?

In house flipping, the goal is to find a house that is undervalued, renovate it, and resell it at a profit, ideally within six months to a year. With buy and hold investing, the goal isn’t an immediate turnaround. Rather, investors will find a property that is in relatively good condition and rent it for a number of years. Over the course of that time, the investor will collect monthly rent checks from his or her tenants and might also do occasional renovations to help increase the value of the property. Once the housing market is primed for a sale, the investor will then sell their property for a healthy ROI.

Is buy and hold investing more lucrative than house flipping?

Both rental real estate investing and house flipping can be extremely lucrative. Buy and hold investing has the advantage of being more stable and providing regular monthly income, whereas house flipping has the benefit of creating a large payout in less time. The risk of losing money on your investment tends to be much lower with buy and hold, because investors have the flexibility to choose when the best time to sell their property is.

What benefits does rental real estate investing have over other types of investments?

Buy and hold investing generates more predictable returns than the stock market. It’s also lower stress and takes less time than flipping a house. Whereas house flipping should be done full-time to maximize profits, rental real estate investing can very reasonably be done as a hobby or a second job. It also has a number of tax benefits including the ability to deduct the costs of repairs, renovations, mortgage interest, and property taxes. It also has the added benefit of providing regular monthly income via rent collected.

How long should I hold a rental real estate investment?

The length of time that an investor holds on to a rental property can vary widely. You might inherit an apartment building from your parents and hold onto it for your entire life, or you might play the market and invest in homes at the lowest point in the housing cycle only to resell them within two or three years. How long you hold onto the house might be dependent upon your buy and hold loan. Many buy and hold loans are intended for investments ranging from 2-5 years.

If I can’t manage my own property, does that defeat the purpose of a buy-and-hold investment?

Not at all. Many real rental real estate investors entrust their properties to management companies. For a monthly fee, these companies can watch over your property, handle maintenance issues, and collect rent on your behalf. Using a property management firm can drastically reduce the amount of time and energy spent on your rental real estate investments without significantly hampering the value of the investment, especially when you consider the monetary value of your own time.

Do I need a buy and hold loan?

Buy and hold loans have a number of benefits. They can help investors leverage their capital into bigger and better investments or split their capital across multiple property investments. Buy and hold loans also help reduce the upfront risks. If you choose to take out a buy and hold loan, be sure to work with a private money lender who can provide you with sound advice and guidance throughout the investment process. Also look for a lender with a solid reputation and long-standing client relationships.