The Buy and Hold strategy, as it applies to real estate, is a more passive strategy which requires a little faith in the market and time.
What is Buy and Hold Strategy?
It is basically a long-term investment approach. A buyer will purchase a property when it is priced low, and then wait for a number of years until the value of the property has gone up. When the buyer is happy with the price increase, they sell the property and make a profit.
Why Does it Work?
The key to using this strategy is understanding the long term life cycles of the housing market. Three telltale facts that make it likely that investors will get their money back are as follows:
- First, the long-term population is growing, so homes are in need continuously.
- Second, costs of construction rise, which ensure an increase in housing costs.
- Supply and Demand rules apply and all markets normally move this way. Although politics can affect this, so investors must keep an ear to the governmental changes.
The buy and hold strategy presents a relatively low risk investment, assuming that all trends follow their normal path. When buying a property low, it is most probable that over time, the value will increase.
The buy and hold strategy can be very valuable, although there is a considerable amount of research to perform before jumping in. If the time and price is right, and you have extra income you can invest for a set number of years, the buy and hold strategy may be the investment option for you.