Reasons to Buy and Hold Real Estate Property for Long-Term Investment (2024)

"Buy and hold" is a stock market investment term you might be familiar with from Dubai's best real estate agents. It describes purchasing stocks or other assets and holding them in your portfolio for some time. This is the same fundamental idea behind buying and holding real estate.

A summary of buy-and-hold real estate investment and the reasons you might want to consider real estate investing will be covered. You'll know more about whether or not this real estate investing strategy makes sense for you by the time you're done reading.

What do you know about buying and holding real estate?

An investment technique known as "buy and hold real estate" is employed by investors who acquire and keep real estate for a certain amount of time. The investor may choose to rent or sell the property in the future temporarily. Finally, unlike buying real estate to flip right away or fix-and-flip, it's a long-term strategy for investment. You might even hang onto a property for your children or grandchildren in a buy-and-hold real estate scenario, giving them rental income or even the money if they want to sell the home.

Strategies for Buy and Hold Real Estate Property

Examining and contrasting investment properties, buying or financing the property, operating or renting it out, keeping an eye on market changes, and deciding whether to sell it are all part of this approach.

Why would you give this investing approach any thought? What an outstanding question. Purchasing and holding real estate may provide you with a reliable stream of income that may last until retirement. They could offer a reliable, long-term return as opposed to fix-and-flip properties.

Every kind of real estate investment is one for which this tactic may be effective. Assessing the risk and earning potential of a possible investment is crucial, though. Consider having a property with a poor earning potential if you plan to purchase and maintain a home in a neighbourhood with subpar schools.

Benefits of Buy and Hold Real Estate

Buying and holding real estate is akin to owning a dividend-paying, blue-chip stock. Nevertheless, real estate offers many tax benefits that other investments do not, and it is generally less susceptible to stock market volatility.

If you need help deciding whether to pursue this long-term real estate investing approach, consider these five advantages of buy-and-hold real estate investing.

1. Regular monthly rental revenue: Investing in real estate to buy and hold it provides a steady flow of monthly rental income. According to a recent analysis from CoreLogic, a top source of property information and analytics, single-family rent rates rose by 11.5% annually through November 2021. There were yearly rent hikes of 16.7% to 33% in several locations, including Miami, Phoenix, and Las Vegas.
2. Possibility of inflation hedge: Over time, buying and holding real estate has also served as a hedge against inflation. Rental price rises are often the result of annual increases in inflation as determined by the consumer price index (CPI), even though historically, housing prices have increased more quickly than inflation. While the median home price climbed by 238% between 2001 and 2020, the United States inflation rate reached 41.26%.
3. Long-term appreciation of property: Long-term wealth accumulation is another benefit of purchasing and keeping real estate. The median sales price of houses has risen by more than 238% during the last 20 years, according to data from the Federal Reserve (Q4 2001 versus Q4 2021). With good maintenance, a home bought for $150,000 twenty years ago would be worth around $357,000 today, an appreciation of $207,000.
4. Purchase and hold yields a significant return on investment: Return on investment, or ROI, measures an investment's profit relative to its cost. As of January 25, 2022, for instance, the rate on the 20-year Treasury is 2.18%. 20-year Treasury securities held to maturity for $150,000 would yield $3,270 in interest income, or a return on investment of 2.18%, for the investor. It is noteworthy that the example presented above was condensed for this essay. The ROI calculations do not account for factors that could raise or lower potential returns, such as an increase in the annual rent price, periods when there is no rental income due to tenant turnover, capital expenses like replacing an HVAC system or roof, or a possible decline in home values.

Tips to Buy and Hold Real Estate Investments

Every investment has some risk associated with it in addition to a possible profit. Some investors choose buy-and-hold real estate investment because it offers a combination of profit and risk and profit. In contrast, highly risk-averse investors can pick treasury bills that pay interest rates below inflation.

The following actions by investors can reduce risk and boost possible returns from buy-and-hold real estate:

• Examine historical, contemporary, and projected patterns using data on employment and population growth, changes in housing costs, the number of renter-occupied homes rising or falling, and the house price index (HPI).
• Make a business strategy that details your real estate investing objectives, both short- and long-term, and make sure they are reasonable and attainable.
• Create a capital reserve to ensure you have cash for scheduled extensive and unforeseen emergency repairs.
• Each time a lease is renewed, raise rents to the fair market price to boost cash flow gradually.

Lastly, buying and holding is an excellent real estate investing technique for reducing taxes. You can deduct depreciation from the purchase of an investment property. You can save money on taxes by doing this. Furthermore, you can sell the property and postpone paying capital gains tax if you retain it for an extended period. A significant benefit is that you can qualify for long-term profit with capital and tax rates. When an asset is held for more than a year before being sold, the rate is lower than the short-term capital gains rate.

Final Thoughts

Investing in real estate and holding it might be an intelligent move if one wishes to build wealth and generate a consistent income year after year of Dubai's best real estate agents. Sometimes, an investor finds the best buy-and-hold real estate prospects outside one's residence.

The top real estate brokers in Dubai handle real estate rental transactions. Buying real estate in a city with extraordinarily high prices may only sometimes result in the best overall profits compared to locations with relatively modest rental expenses.