Benefits of Buy & Hold Investing

Real estate is not a get rich quick scheme. In this industry, true wealth is built over time. Real estate investments should be held for the long haul as this is where massive gains are made. In this blog post, I’d like to cover the benefits of long term buy and hold investing and why you should consider holding your properties 20, 30, 40, or more years into the future.

Principal Paydown

As time goes on, the power of owning a property magnifies. This is the case because with each year going by, more and more payments are being made to your mortgage. Part of this payment is for the interest while the other portion goes to your principal. Each payment means more towards the principal, decreasing your risk, and increasing your equity. This example is often overlooked but can be extremely powerful for investor’s returns in building long term wealth.

Long Term Value Creation

Adding value to a property can take time. Through buy and hold investment, you will be able to make these necessary improvements and live to see the payoffs as time goes on. In many situations, capturing all of the potential of a property will take a couple of years or more. This is especially true if you are paying for all of your improvements out of your own pocket. Sure you can do flipping or other forms of short term gains but a lot of these leave money on the table. Optimal returns are frequently achieved by adopting a holding strategy, where reinvestment is continued for as long as possible. Your long term approach will yield higher levels of cash flow thus improving the return on your investment.

High Operational Efficiencies

Holding properties for a long time will teach you a lot of valuable lessons. Over the years you will learn the ins and outs of the business and create a series of systems that will make your life as an investor much easier. With each year, you become more knowledgeable, build better relationships, and ultimately become more efficient as an investor.

Minimizing Transaction Costs and Taxes

Selling real estate costs money. With each sale, there are a series of transaction costs and taxes that pull money away from your wallet. There are commissions to be paid, title fees, other legal fees, and taxes. Holding investments keeps all this from happening. This money will stay with you and will help add to your overall wealth.

I hope this gives you a little insight into why holding your investments for the long term can be so powerful. I encourage you to look more into this and see how it can change your life for the better. Work hard and be smart. Success will follow.