5 Tips for New Buy-and-Hold Investors

Real estate investing is a great way to diversify your portfolio and ensure your investments can stand the test of time.

Although the quick turns of fix-and-flip investing are popular nowadays, many investors still prefer the passive income and long game of the buy-and-hold method. Let's look at how this strategy works for building a solid and diversified portfolio, as well as a few tips for success if you're just getting started.

What Is Buy-and-Hold Real Estate Investing?

Buy-and-hold real estate investing may sound like a complex strategy, but it’s pretty simple. Instead of buying a property then fixing and flipping it or selling it right away, a buy-and-hold investor purchases properties to keep in their long-term portfolio. Buy-and-hold properties can also be referred to as "rental properties."

When investors hold real estate for an extended period, they are protected from short-term market fluctuations. If they’ve done their research and chosen property in an area with a good potential for appreciation, they can enjoy the passive income from tenants while the property steadily increases in value.

5 Tips for Buy-and-Hold Real Estate Investment Success

This type of investing can be a highly lucrative strategy. However, before you get started buying and holding real estate, make sure you’ve done everything possible to set yourself up for success. Here are five of our best tips.

1. Crunch the Numbers

Before making any purchases, make sure you’ve crunched the numbers. Understand your monthly fees and other associated costs, as well as what you can expect to receive monthly once you rent out the property.

For example, some neighborhoods operate as an HOA (Homeowners Association) which requires homeowners living in the neighborhood to pay monthly fees to the association. Many investors avoid buying properties that are part of an HOA because the fees will cut into their return from the investment.

A real estate data software like PropStream offers HOA data and so much more, making it a crucial tool for planning your investment.

Pro Tip: Need to perform renovations on a rental property? Use our Rehab Calculator tool to get an estimate of what they'll cost!

2. Pick the Right Market

Not every area is appreciating at the same rate. To ensure you’re making an intelligent investment, do plenty of research on the area where you’d like to buy. Some of the fastest-growing real estate markets for 2022 and beyond include Nashville, Raleigh-Durham, Phoenix, Seattle, and Boston.

3. Understand Your Duties as a Landlord

Many investors don't want to be landlords. If you’re in the same boat, don’t worry. You can always hire a property manager who can oversee the property on your behalf. If you plan to do this, factor property management fees into your initial calculations so you can see if the margins still work for your needs.

4. Increase Your Rental Margins With Some Upgrades

If you buy a unit or building that you intend to rent out, you can maximize your rental income by making small yet meaningful improvements. Think about simple updates such as a new coat of paint, refinished cabinets, or better appliances.

5. Know How to Get Out if Necessary

Before you get in, most real estate investors recommend developing a strategy for how you’ll eventually get out. At this point, you should consider how long you’ll want to invest and what factors could make you pull the plug early. This will help you develop a solid understanding of the market that can help protect your investments.

Start Planning Today

Whether you’re a seasoned buy-and-hold investor or just getting started, PropStream’s multi-sourced property data can help you find off-market properties in regions with the most potential. Click here to get started with a 7-day free trial today.