Real estate investors make money off of properties in a number of different ways. House flippers buy a run-down house and renovate it immediately, with the intention of quickly reselling it at a profit. Buy-and-hold investors pursue the opposite strategy, purchasing properties with the intention of owning them for many years and benefiting from their appreciation over the long term. Buying and holding can be a lucrative pursuit, but it requires substantial capital because you won't see any returns for a long time.
1. Choose your properties very carefully. A prime property for a buy-and-hold strategy is reasonably priced, easily renovated and located in a good location. Your choice of which property you buy is the most important factor in the success of your real estate venture.
2. Remain emotionally detached from any property you are buying as an investment. How you feel about the building or whether you would want to live there are irrelevant. You will be renting or selling the property to other people, so the real question is how much public appeal the property has.
3. Leverage your assets by using them as down payments and borrowing the majority of your investment from the bank. Do the math carefully before investing. As long as your income from rentals and appreciation is larger than what you are paying to the bank in interest, fees and in other expenses such as insurance, taxes and maintenance, you will be making money.
4. Cover your expenses by renting out your property during the time that you own it. Choose your tenants carefully, and don't be shy about asking for references. The difference between a responsible tenant and a troublesome one can be the difference between an enjoyable, profitable venture and a real estate nightmare.
5. Don't buy outside your comfort zone. If you overextend yourself to purchase a property that is beyond your means, you could end up in financial trouble. Start out with smaller properties, moving up to larger ones as your financial profile becomes more stable.
- Buying properties that are in the area where you live allows you to keep a closer eye on them and cuts down on travel time.
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