Top 3 Mistakes with Buy and Hold Real Estate Investing
Buy and hold real estate investing is one of the most common real estate investing strategies. It refers to the process of purchasing a property and holding on to it for an extended period, usually 5 to 7 years. The buyer may or may not sell the property down the line, but it is considered to be an excellent way to build wealth over time.
Buying and holding real estate is something that does not require much experience. It is less complicated than fixing and flipping properties. However, any investor is still prone to occasional slip ups.
What are the mistakes to watch out for with buy and hold real estate investing?
Make sure your investing runs as smooth as possible by staying away from the following common mistakes.
Paying more than you should
When it comes to real estate investing, one important rule is to find the best deals. It holds true for whether you are a wholesaler or a flipper. Why? Because this is the only way you can earn profit quick. However, if there’s one thing you should never do as a buy and hold investor, is to overpay or overspend on properties.
Remember that paying for an expensive property may be detrimental to your cash flow. So, as a buy and hold investor, it is important to take time to learn how to get the best deals and buy low-priced properties. Also, try to learn from the strategies of successful wholesalers and flippers.
Buying properties with very low cash flow
Another huge mistake any buy and hold real estate investor should never commit is to invest in rental properties with very little or negative cash flow. This is an extremely risky move to make. However, some investors opt to take this route in the hopes that the properties they invest in would eventually increase in value. It’s impossible to have an accurate prediction on how the property’s value will fare considering that the market fluctuates relatively quick.
So, instead of buying a property and relying on its appreciation as your potential profit, it is best to go for properties that are below market value. You can also look for some properties to improve to increase their value. In addition, it’s better to buy properties which already have a positive cash flow because you can instantly earn a profit as soon as they are rented.
The key is to invest in properties with the mindset that you are investing for cash flow. Regardless of the home value, you can make money from the cash flow. Real estate investing is a long term play so it’s important to remain patient.
Not taking buy and hold investing as a serious business
If you want to get real with earning a profit and building wealth from buying and holding real estate investments, you have to treat landlording as a serious business. Be sure to keep your properties well maintained. Keep an eye on your finances and take good care of your tenant relations.
Remember that landlording is more than loose regulations and handshake agreements. It’s a business you have to take seriously if you want to make it in the long run.
Investing in buy and hold properties offers a number of advantages.
Take a look at some of the benefits you can get from real estate buying and holding.
- One of the benefits of buy and hold real estate investing is the monthly rental you can get from it. Besides the rent, you can also generate money from other things like parking and laundry.
- Buy and hold investments will also let you build equity in the properties you’re holding.
- Properties may fluctuate in value but if you have chosen the right location, it would be safe to say that its value will increase over time.
- Buying and holding real estate properties offers promising tax advantages such as property tax benefits.
Real estate is a very promising industry to invest in if you want to build wealth. And if you have chosen to take the property buying-and-holding route, this is a guide that can come in handy.
Learn more about real estate investing by visiting our website, Colorado REIA.