Top 5 Reasons to Buy and Hold Real Estate

Most people consider real estate investing the buying and long-term leasing of real estate. While this can be a daily business as well, most investors that buy real estate to hold do so for the long term benefits and passive nature of the investment.

I believe buying and holding real estate for the long term is one of the most effective wealth building strategies available to the general population.

1. Appreciation

When you look at real estate over the long haul, it’s accurate to assume some level of appreciation in your real estate holdings. Yes, there are market cycles where values rise quickly or fall quickly, but by and large, real estate is an asset class that appreciates. In addition to this, investors have the ability to research market dynamics and make fairly knowledgeable decisions based on anticipated appreciation for a particular market.

2. Passive Income

Holding real estate can be a very passive investment that provides returns much higher than could be obtained through other passive investments (ie. stock, bonds, etc.). With the ability to outsource property management, accounting, etc., investors can still make good returns while playing a very hands-off roll in the investment.

3. High ROI

With the ability to acquire high leverage comes the ability to obtain a very high return on investment. Not only does your monthly cash on cash return go way up when you use leverage , any appreciation on the property amplifies your ROI as well. This is because the entire asset appreciates rather than just the amount of money you invested as a down payment.

4. Tax Benefits

As taxpayers in a tightening tax system, any kind of deduction can be helpful. Owning real estate allows for the deduction of mortgage insurance as well as the depreciation of the property itself. In addition to this, real estate can also afford you the opportunity to defer tax liability by using 1031 exchanges to continue investing funds in new properties while deferring tax liability indefinitely.

5. Increasing Rents –

Very few would speculate that housing rents will decrease over time. Most analysts have already stated that rents are expected to increase over the coming years. Owning real estate not only allows you to lock in housing prices and interest rates that are at all-time lows, it also provides you with the an opportunity to increase future cash flows by increasing rents … thus increasing your ROI in future years.

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