Buying and Holding Investment Property—The Essence of Investment

With myriad options to flip, speculate, lease, rent, and the countless other ways to sink your money into real estate, it is my concern that investors have lost sight of the most fundamental strategy to earning money with property: buying and holding.  We find ourselves currently in a market that allows for the kinds of discount buys that have not been seen for decades, and in all likelihood will not return for years to come.  If you are a typical real estate investor, you entered into this industry in order to earn passive income (making money even when you aren’t clocking into and out of work), and there is no better way to do that over the long-term than to be the outright owner of properties that both appreciate and cash flow.

Like all investment portfolios, the best real estate investment portfolios are diversified.  This means that whether you are a flipper, speculator, developer, or whatever else, it can only be wise to taper those risks with investments which are designed to be held for appreciation and cash flow in the long run.  By the same logic, no one can expect with any degree of certainty to become a multi-millionaire by only buying and holding homes (obviously your capital would all be spent on your initial purchases).  Instead, play the short-term real estate game; accumulate some money; learn the important lessons of what to invest in, where, and when; and then buy that property, with no intention of ever selling it.

Owning properties is like having leverage in your own life.  Say you buy and hold five investment properties.  Every month, you will open your mailbox to find five new rent checks (totaling perhaps $5,000 – 10,000).  Your net worth is most likely a millionaire, since you are the outright owner of those properties.  You reserve the right to sell any or all of those properties in an expanding market to cash out.  Finally, you put in virtually no work hours to those properties to perpetuate their cash flow or appreciation, leaving you free to pursue other interests, hobbies, careers, or investments.

Although there is plenty of opportunity to earn a profit in the short-term real estate market, there are still some remnants of the age-old notion that buying property is always a smart investment.  Although it is no longer true that investors can expect a perpetually-expanding housing market (as in decades past), it is still true that owning a home can provide both income and opportunity for the savvy investor who manages the task responsibly.  Buying and holding an investment property should therefore not be overlooked even by the most motivated investors looking to get rich immediately, as it will be a healthy addition to any investment portfolio.

What do you think?