Buy and Hold for Cashflow | Think Realty | A Real Estate of Mind
Investing Strategies

Buy and Hold for Cashflow

Buy-Hold-for-Cashflow

Keeping your eye on the prize is key for this long-term investment strategy.

When you’re looking at investment properties, you’re always exploring your options. In the world of real estate investing, there are almost as many strategies to consider as there are properties out there! With all the investing options, I have found buy and hold works.

5 Reasons Why Buy and Hold Is My Favorite Strategy:

#1: It gives you greater stability.

Every month I know the cashflow I’ll be earning per door. If that is a single-family residence that’s just one door. If it’s a multi-family property, I get to multiply that cashflow by the number of doors. As you move forward in your real estate investing business and build your skills, you might see the major advantages of investing in multi-family properties — this can be a very lucrative buy-and-hold strategy!

#2: You can push up the appreciation.

If I have a property that I’ve taken for the long term, there are things I can do to bump up rents and increase value. It could be something very simple like giving the exterior of the property more curb appeal. You’ve heard the old adage of “slapping a little lipstick on the pig”? Well, even a pig can look pretty with the right improvements. In this case, it’s landscaping not lipstick, but you get the idea. It doesn’t have to cost a lot of money to make these improvements, but it will likely cost you time because many things you can do on your own. You don’t have to hire an expensive landscaper to take out ugly shrubs and plant blooming flowers.

#3: You get to depreciate the property over 27.5 years.

If you hold onto a property long enough, you’ll be able to take the depreciation that occurs over time. That may not mean much to you now, but come tax time it certainly will. You can depreciate the property, plus depreciate line items. For example, if you put in nice, new appliances when you take the property over, those items have a depreciation schedule. Every year for a period of time their value goes down, which means you get to claim that depreciated value on your taxes. Always be sure to consult a tax professional!

#4: You can use the property in ways beyond your typical rental.

For example, you could put a business inside the property — perhaps creating assisted living for elders or sober living for those in need, or you could turn a property into an income-producing vacation rental or corporate rental. Those can earn thousands of dollars a month. I know several people who are using that strategy right now, but you can’t use this strategy if you don’t intend to hold onto the property over the long haul.

#5: You’re not stuck buying properties in your own back yard.

You can use the buy-and-hold strategy anywhere. In fact, I can’t think of a place where you can’t buy property and hold onto it for years. I prefer local properties to out-of-state properties because I like to be able to drive by them and check on them when necessary. Many people prefer to buy in other states. If you choose this route, you will need a dependable team that knows how to handle problems that may arise, unless you can jet to that property at a moment’s notice.

When you find a property that matches your criteria, ask yourself these questions:

  • Will it appreciate?
  • What is the depreciation rate?
  • Will it create cashflow for you?
  • Will it sell one day so you can move on to the next property and the next?

 

Then you apply the strategy that works for the particular property in question. If it matches, it’s time to get it under contract! Make it your own. And that’s just the start of the many creative strategies you can use to build your cash-flowing property portfolio.