How to Buy and Hold a Property

These days, the one of the more common forms of real estate investing is house flipping. Quickly fixing and flipping has become a trend due to popular television shows and because of the media. The fix and flip as the potential to be extremely profitable, and is best utilized when the market is on a downswing or plateauing.However, if the market is improving and will continue to improve over the next few years, you might want to consider buying and holding instead. The buy and hold had been around for much longer than the fix and flip and it is a technique used by some of the richest people in history. Buying and holding is exactly what is sounds like. Instead of buying, rehabbing and selling, you will buy and then sell at a much later date. While the home is in your possession, you can rent it out to tenants if you so choose.


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    Make sure the market will improve. The first, and perhaps most important step in the process is actually determining if you should buy and hold at all. In real estate, you profit from the difference between the initial cost of the property and how much you end up selling it for. There are two ways to do this. In a fix and flip, you make improvements to the home that increase it's value. In a buy and hold you'll need the house to appreciate in value. If it doesn't look like the market will get any better any time soon, you might want to try a different route.
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    Find And Buy A Property. Like any form of real estate investing, you need to find the right house to make the project worth while. Get an accurate ARV, or "after repair value", from a trusted real estate broker and never pay more than 70% of that number. Consider elements like neighborhood, school district reputation, and general location. In a fix and flip you would try to find an ugly duckling in a good neighborhood with strong bones and no major structural damages. With a buy and hold, you could go this route and repair the home, or you could simply find one in already good condition.
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    Decide How You Want To Lease It Out. While making money years down the road is your main goal, it's always a good idea to have a short term plan too. A great way to generate a monthly cash flow is by leasing the house out to tenants. There are a few different ways you can do this: leasing, lease purchasing, or lease optioning out to tenants. A lease purchase legally binds the tenant to purchase the home after the lease term is over, while a lease option simply gives them the choice to. The lease option also comes with what is called an "option consideration", which is a fee that the tenant has to pay to have a choice in the matter. If the tenant chooses not to purchase the home at the end of the term, the option consideration is yours to keep.
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    Find Tenants. This is a step that many investors overlook. You want to find a tenant or tenants that will cause the fewest problems as possible, and is the most reliable. If the tenant is constantly late on rent, you might not have the cash you need to invest in other properties. If the tenant is a party animal or destructive in any way, you might end up having to pay for new appliances and have to get the house worked on. Finally, you don't want tenants that are going to do anything illegal on your property, or even do anything without a permit.
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    Hold On To The Property And Collect Rent. If you've found the right tenant, this step can sometimes be a breeze. All you'll need to do is sit back and collect the rent, fixing the occasional problem. Once you get the lay of the land, you might consider buying a few more properties to rent out and doing the same thing. Just make sure you keep your tenants orderly, and keep your property in prime condition so that you can sell it when the time comes. Which brings us to our next step...
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    Sell The Home. When the house has finally appreciated in value, it is time to sell the property and collect your long-awaited profit. If you are selling it to the tenant through a lease purchase or a lease option, the work is already done for you. However, if you are selling to a third party, you will have to put the house on the market. In addition to using a real estate agent, you should also list your home online and in newspapers. A cheap way to get the word out that you have a property is by using bandit signs. When you've found the right buyer with the right offer, just sign the papers and cash your check!


  • Cash is often quicker and easier than finance when both buying and selling your property.


  • Never let a person with poor financial history be your tenant.

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Categories: Buying Property