Long-term wealth building is a common goal, as most people desire financial security and the freedom that accompanies it. That stability means being able to weather financial storms, the freedom to pursue exciting adventures like traveling, and the possibility of building legacy wealth through investment property lending. 

One of the best ways to build long-term wealth is by investing, specifically in real estate. Buy and hold real estate programs are a great way to earn passive income and set your future self up with long-term wealth. As the name implies, buy and hold is just that; it’s purchasing a property, renting it out to tenants, and holding it for many years. Then, after anywhere from 3 to 30 years, selling the property at an appreciated value for a possible big-time payday. 

Understanding Buy and Hold Real Estate

Purchasing real estate can be an effective way to make money, but it’s certainly not guaranteed. And, there are many real estate strategies to consider, too. One of the more prevalent strategies is a fix and flip. But investors should know that’s a vastly different approach compared to buy and hold. 

Fix and flip investing, or house flipping, is a short-term real estate strategy, whereas buy and hold strategies are longer term. When a person buys a fixer upper to flip, they need to devote a great deal of time by either renovating the property themselves or paying contractors to do so for them. And because they intend to sell the home quickly—usually within a few months—there’s a higher risk associated. 

Conversely, buy and hold real estate focuses on making money after multiple years and in a passive, rather than active, way. A buy and hold strategy brings lower risk, but does require hiring a property manager or filling that role yourself. 

How a Buy and Hold Works

If buy and hold real estate investment is something you’re considering, let’s examine how it works. The first step is purchasing a suitable property. Suitability is heavily dependent on location and the property’s condition. The next step is making it rent-ready, ensuring any needed upgrades or repairs are made. Once it’s set up, the next step is finding renters and managing and maintaining the property. That’s where a property management company comes in, if you decide to go that route. After multiple years, you can sell the property and hopefully benefit from appreciation. 

Advantages of Buy and Hold Real Estate Investing

The biggest advantage of buy and hold real estate is realizing appreciation of the property in the end. Historically, there have been strong upward trends in property values when looking at the big picture. For instance, according to FRED Economic Data, the median price of houses sold in the United States in the second quarter of 2024 was $412,300 compared to $288,000 in the second quarter of 2014, which is more than a 30% increase in a decade. It’s important to note the 10-year period; that’s a long time in the market for a piece of property. Which is why time in-market is more important than timing the market, like with a flip. 

Inflation is helping drive up property values, too. Higher interest rates are keeping some folks in their houses longer, leaving less properties on the market. That helps increase demand, pushing values higher and higher. So, while it’s not a guarantee of appreciation, holding a property for more than five years is more likely to result in wealth building.

Another benefit is the cash flow and passive income renting a property brings. The amount of passive income someone can make on a rental property is dependent on how much they can charge for rent versus their mortgage. For instance, renting a house in a college town is smart because there is a new crop of renters every year. And as you pay down the mortgage, you can collect more income over time. That cash flow can be used toward paying down the mortgage, used as supplemental income, or for needed repairs or upgrades to the property. 

Let GenWealth Capital Commercial Help You Decide if Buy and Hold is Right for You

Buy and hold real estate is a powerful strategy for building long-term wealth. And it does hold some advantages as well as disadvantages. One advantage is that you can build long-term wealth, but it does take a long-term approach to reap the benefits. It’s a great strategy if you’re looking to make money over multiple years, but not the right approach if you’re needing a quick infusion of cash. A buy and hold real estate strategy means managing a property while you’re the owner, making sure it stays in tip-top shape so it can appreciate in value when you decide to sell. Overall, a buy and hold real estate program is a major move that needs to be made with the advice of professionals. 

We invite you to contact us at GenWealth CapCo to learn more about investment property lending and how we can assist with your real estate investment goals.