We’ve covered the advantages of a buy-and-hold real estate strategy.
1. High Leverage
Real estate is one of the few investment options where considerable leverage may be accessed through finance. Mortgages allow you to acquire a $1 million asset with only $200,000 down.
Transparent money with Sophia Luis seated on it
2. Significant Return on Investment
This high degree of leverage allows for a potentially lucrative rate of return.
Leverage can improve your cash-on-cash return.
All of the asset, not just the initial investment, grows in value as you add appreciation.
Those who put money into real estate do so based on the expectation that their investment will rise in value.
The value of real estate tends to rise with time.
Timing and market cycles do matter, but if you buy and hold for a long, you can probably count on a profit.
4. An Undemanding Source of Income
If you get into real estate investing with the appropriate mindset and do your homework, you should be able to generate substantial passive income.
I know this is controversial, but I feel it’s necessary to say: even with outstanding property management in place, the investor will need to be somewhat active, at least enough, to have an annual meeting with the Property Management to ensure everyone is on the same page.
Despite this, investors should expect satisfactory profits from their passive involvement in the transaction.
5. A Tax-Aware Person
Mortgage insurance and property depreciation are both tax-deductible expenses for property owners. A person can amass wealth by taking advantage of Section 1031 exchanges, which allow them to defer taxes while investing in brand-new properties indefinitely.
6. Paying Off Your Mortgage
You borrowed money to buy an investment property and are now collecting rent to cover your mortgage and operational costs, with the bonus that your renters are also paying down your loan. As the length of your mortgage term increases, a more significant portion of your payments will go toward reducing the loan’s principal.
7. A Rise in Rent Prices
Every year, the rent increases.
Both landlords and tenants are aware of this trend, which is why we stress the importance of homeownership and encourage first-time tenants to take the plunge if they can afford it.
By increasing rents, the owner of investment property can improve his or her cash flow.
8. Acts As a Buffer against Inflation
To protect one’s wealth from expected inflation, real estate investment property combined with debt is a smart choice.
Housing costs will increase along with general inflation, so investing in a rising asset is a simple method to protect yourself from market volatility.
9. Financial Security Pension
The likelihood of being able to retire on rental income throughout twenty to thirty years is very high.
You can retire affluent (and ideally a bit early!) if you buy one or two units per year, time the market for 1031 exchanges, and stick to your plan.
Investors can build a net worth in the millions by purchasing homes outright and living off the rental income they generate.
10. Exit Possibilities Galore
Buying a rental property reduces investment risk, and if the worst were to happen, I could always move into one of my units and live there until things got better.
In the absence of such a catastrophe, investors have several options for getting the money they need out of their investments.
Real estate can be sold, refinanced, leased, offered with seller financing, or leased with an option to purchase to a tenant.
Putting money into real estate is a tried-and-true method of amassing wealth.
From the more traditional to the more out-of-the-box, anyone can rapidly understand the ins and outs of real estate investing and get started!