It seems this industry likes to come up with all these different kind of fancy terms and makes it a little difficult for people to get involved in Real Estate Investing. Really, buy rent and hold investing is a rental property.
What they do is they call it a buy rent and hold because first of all you have to buy the property. So that means going out looking for a property that you are going to eventually going to own. Then you are going to buy that property and then once you buy the property you have it under title you actually own it then you rent it out. What that means you go out and you look for tenants and you advertise for tenants, you obviously you get the property ready.
The long term goal of this strategy is to rent it out and to earn money through income and it becomes a rental.
The idea is to rent it to a tenant for more than what your costs are for caring that property. Sometimes people will buy a property with a negative cash flow because they are looking for appreciation. To be that is not really a buy rent and hold thats speculations and I would never do that. So again, you are renting this property out with the expectation that the rents that you are going get are going to be higher than the costs of maintaining this property.
Hold, just means that you are going to hold it for a long period of time. You don’t go into a buy rent and hold investment strategy where you buy it and rent it out and you sell it within a year or two. Usually, these are longer hold positions. Meaning, you are going to hold the property for 10-20 years or even longer. As long as the property is in good condition. Eventually, you will have paid that property off so now its generating a good income for you. You don’t own any money on it and its a very passive investment and its a good strategy for somebody who is looking to put together a retirement package.
So you are buying it you are renting it and you are holding it for a long period of time. For example: lets say you bought one of these investments and you bought it for $350,000. Then you rent it out and you rent it out for $1500 a month, your total costs are $1200 a month. So the difference is $300. So you are making $300 a month on this property.
Depending on how long you have amortized it for, how long your payments are for so lets say over 15-20 years you eventually get the mortgage paid down and you owe nothing on this property and the rents have gone up as well. So that $1500 a month payment is now maybe $2000 a month and you don’t owe anything. So you have a $2000 property its now generating a net cash flow of $1500 a month because of the increase in prices…not a bad passive income. You do 10 of those that is $15,000 a month.
Buy rent and hold as compared to the other strategies the most commons are fix and flip and rent to own.
So that is what Buy Rent and Hold Investing is.