When you’re getting start in real estate investing, it can become very daunting. What do you get started with? Rental properties, or do you dream of fix-and-flipping? Perhaps you’re looking into wholesaling?
But of all the investment options, there’s one first-time investors turn to time and time again, rental properties. It’s typically called “Buy and hold”. This involves buying a property and holding it as long-term investment.
Buy and hold is a residential real estate investment type where an investor buys a property the plan to own over a long period, anywhere from 5 to 30 years. The value increase over time, stable monthly cash flow and tax benefits can be very rewarding. These can be single family homes, apartments, or condo’s and townhomes or other multi family options like duplexes and fourplexes.
Long-term hold benefits
Appreciation – Over the long term, rental investments typically will appreciate, or grow in value. The market is constantly changing, but the market always seems to recover. Investors often will invest based off appreciation.
Rental income – Investors can make money from their rental income. Many investors will buy their investments based off the cash flow a property will bring monthly.
Leveraging equity – Leveraging equity can be a way to purchase more properties. Let’s say you had a property with 40,000 in equity. You could use a Home Equity Line of Credit (HELOC) to cover the down payment on another investment, that could cash flow enough to cover that HELOC, and that investment.
Principal pay down – During the time that you are renting this property out, you would be having the tenant pay down the principal that is owed on the mortgage note.
Tax benefits – Owning real estate can include some good tax benefits. Including some of the following:
- Mortgage interest
- Property depreciation
- Repair and maintenance cost
- Property taxes