Buy-and-hold investment properties are by far one of the most talked about real estate investment strategies. When done right, it offers both short and long term benefits; and it’s a great way to diversify your portfolio. But how do you go about making the right buy-and-hold investment? I do not claim that this article will be enough alone to qualify you as an expert, but it can certainly be the ultimate cheat sheet. Here’s what you need to know about buy-and-hold investment properties.
Step 1: Take your time to find the right property
Perhaps that’s the most important tip I can leave you with. A property can really make or break a buy-and-hold investment deal. Sometimes a property may look like a good deal, especially if it’s on the cheaper end, but if there’s no demand, you’re not going to profit!
So, to find the right property, you need to make sure of the area’s real estate market. Is it in demand? Will you attract the right tenants? If so, what will set you apart from other real estate investors in the area? With high tech tools like Mashvisor, this process become easier. You can easily analyze a property in minutes. So, feel free to use the help that will narrow down your search time and quality significantly.
Related Article: 5 Ways to Find an Investment Property
Step 2: Think about how to finance your buy-and-hold investment property
There are many ways to finance your buy-and-hold investment property. There’s a notion that you can’t use hard or private money in this type of real estate investment. It’s not true. You have many options – cash, FHA financing, private loans. You can also get a little creative by flipping a property and using the money as a down payment for another. You can even start a partnership and team up with a partner who has money. You do the work, they put in the cash, while the profit is split between the two of you.
You have plenty of options! But before jumping into one, make sure you assess your financial situation carefully in order to decide which method suits you best.
Related Article: Financing a Rental Property: What’s the Best Way?
Step 3: Hope for the best, plan for the worst
You want to have plan B, C, and D. Buy-and-hold investment properties take longer and cost more than you expect, this is especially true in the beginning when you’re first starting out.
What you should ideally do is budget carefully and overestimate the budget. It’s always better to end up spending less than expected than having to whipping up some debts last minute. This is not to scare you, but prepare you. You may enjoy months of tenant free problems; and then out of the blue, you have to spend tons on maintenance for a furnace breakage. So, plan for these crazy moments that can happen at anytime. Having some wiggle room helps you stay stress free and enjoy the perks of being a real estate investor.
Related Article: 4 Different Ways of Renting Out Your Property
Step 4: Think of hiring management
That’s the dwelling question when everything is in place: do you hire management or do the work yourself? Most tenants are great, but we’ve all heard those rare horror stories. In order to avoid that completely, you can hire management that will leave you our the direct stress from dealing with tenants. If you decide to hire management, that will also free up some of your time to look for more properties and think of new real estate investing ways.
If you’re hiring management though, make sure everything is still in check. For instance, if you’re using a management company, make sure you check the turnover rate. And if the maintenance expenses get too high, ask for an explanation. If the answer is not good enough, switch management companies. So, hiring management will help you, but make sure you’re still aware of everything going on.
However, if you decide to opt out of hiring management for your buy-and-hold investment property, then you still need to create a deliberate, clear system in place. You need to put in time, effort, and lots of patience for running your real estate investment show. But, no worries, enjoy the journey of your job.
Related Article: Professional Property Management: Pros and Cons
A final note…
One or a few buy-and-hold investment properties will rock your portfolio! Just take your time to set up your success right. Use our tips and pursue them through additional research for optimal results.
You can find a buy-and-hold investment property that matches your criteria Mashvisor by using the different filters. Use the investment property calculator to get an idea of your property’s expenses and income.