Is Buy and Hold Real Estate Investing Right for You?

  • Author: Devin Henry
  • Last Updated: June 2, 2021
Table of Contents

Knowing what you’re getting into when investing in real estate can make all the difference between truly lucrative opportunities and funds wasted. As a real estate investor, you must pay careful attention to the market, have a solid real estate investment strategy in place, and know what to expect from your investments.

Does the buy and hold method work for your portfolio? Take a look at this guide to learn more about the advantages of buying and holding real estate.

What is Buy and Hold Real Estate Investing?

When you choose to buy and hold real estate, you start by buying a piece of property, then hold it long-term. Investors typically plan to sell the property down the line, but their real estate strategy includes holding onto it for several years before trying to sell. Owners will often rent out the property during the “holding” period, which can help pay the mortgage on the property and, in some cases, even allow for a source of income. 

This is different from real estate investors who choose to buy a property that needs substantial work, then flip it quickly, however. This “fix and flip” strategy often leads to much faster turnover.

The Perks of Buy and Hold Real Estate Investing

Long-term real estate investing has a number of advantages. Many investors find that choosing to buy and hold properties can help boost their portfolios in a number of ways. Here’s a look at some of the most common upsides to the strategy.

  • Buying and holding real estate generates income through your rental property.

You may generate more income through your rental property than you need to pay for the mortgage in some cases. In others, this strategy can help you build equity in the property, which you can regain later. Rental income can help you continue to grow your real estate portfolio or allow you a little more cash flow, which many people use as critical parts of their investment strategies.

  • You stand to gain quite a bit of money if you have a strong understanding of the market and can hold the property long enough.

Individuals who buy and hold properties often discover the value increases substantially if they hold real estate long enough. While property values can increase and decrease over time, for the most part, real estate investments pay off in the long term. Generally, investors discover that their homes increase steadily in value over several years.

  • Real estate is a tangible investment.

Unlike many types of investments, real estate offers the ability to invest in something tangible. You can visit your property, touch it, and maintain it. Many people who prefer a more involved investment style find that this type of investment works well for them.

It’s always best to consult with real estate professionals, wealth management experts, and other advisors before jumping into any investment strategy, including real estate investments. These professionals can help you determine which investments are right for your portfolio.

A bunch of keys in a pile

5 Crucial Things When Choosing Investment Properties

The buy and hold strategy can offer a number of advantages, but it does carry some risks that you must consider as you prepare your overall investing strategy. Here’s what to keep in mind:

1. It’s important to do your research before you buy.

In order to increase the likelihood of an effective investment, you should carefully check out the property before you purchase it. That includes:

  • Doing your due diligence
  • Having the house thoroughly inspected
  • Making sure that you carefully research the neighborhood

If the neighborhood has been steadily going down in value over several years, you may have trouble getting the returns you’d hoped for on your investment property. Likewise, if you have to do more repairs than originally intended, you may mistakenly exceed your budget. Rental income can help pay the mortgage, but not if you don’t have a solid strategy in place.

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 2. Buy and hold investing does not always allow for ready cash flow.

Buy and hold investing is a long-term strategy. You don’t intend to buy your investment property, then hold it for just a few weeks or a couple of months. You may end up with a large percentage of your available funds tied up in the purchase of the property. A buy and hold investment won’t typically turn around quickly, so it might not be the right move if you need easy liquidity.

3. You need to factor in property management if you want to buy and hold a property.

Since you’re planning to hold the property — potentially for years — you do not want it sitting empty long-term. As an investor, you may not want to manage rental properties yourself, and keeping up with those property management needs may not fit your investment strategy. Hiring a property management company can help decrease the frustration associated with managing a rental property, but will also increase your costs and further cut into your cash flow. Rental properties can bring significant challenges, especially if you aren’t prepared ahead of time.

4. Rental properties carry special rules.

As a landlord, you will have to follow certain specific rules regarding your rental properties. As an investor, you may be focused on the financial attributes of the building. Renters want to know that they’re getting a comfortable, livable home, though, and that you’ll take care of any issues as they arise. Whether you’re purchasing single-family homes or apartments, it’s important to know those rules before you invest in real estate.

5. You have to know the local real estate market.

Real estate appreciation is a very real thing. As an investor, you need to know the local real estate market. Partnering with an experienced real estate agent can make it easier for you to choose investment properties that meet your specific requirements and fall under your real estate investing strategies.

Is Buy and Hold Real Estate Investing Right for You?

To determine if buy and hold property investment is the right strategy for you, ask:

  • Do I need ready cash flow?
  • What does the housing market look like in my area?
  • Am I prepared for the challenges of long-term investment?
  • Can I secure financing for an investment property?
  • Do I want to use a property manager?
  • How much passive income can I generate through owning real estate?

If you’re ready to get started and take advantage of the benefits of investing in residential real estate, an experienced real estate company can help. Contact Nomadic Real Estate today to start looking for your next investment property or to ask questions about buy and hold investing.

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Enhanced Reporting

Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

Scroll down to learn more about Reports:

Navigate to the "Reports" module in your portal:

Owner Portal Reports
  • Keep in mind, these reports are dynamic records. They will refresh to display current information every time you view them. 

Enhanced Rent Roll Report:

Enhanced Rent Roll Report
  • The Enhanced Rent Roll Report will show the rent amount, last payment date, move-in date, lease expiration date, and security deposit amount for each of your tenants. 
  • It will also show a portfolio summary with occupancy percentage, vacancy loss, and more!

Unit Comparison Report:

Unit Comparison Report
  • If you own multiple units (or buildings) with Nomadic, you’ll get access to the Unit Comparison Report. 
  • This report enables you to quickly compare financial performance between your units at a glance without toggling between individual reports. 

Income Statement Month-Over-Month:

Income Statement by Month Report
  • The Income Statement Detail – Monthly Report serves as a month-over-month record of portfolio performance. You’ll see itemized income and expense categories and can track monthly. This report will update with fresh data every time you view it. 

Financial Statements

Financial statements will be published to your portal on a monthly basis. The statements are found in your Documents library, and provide a historical record of all financial performance. The statements serve as a snapshot of financial performance over a given period, and are static documents (unlike Reports, the statements do not update/change in real-time). 

Scroll down for more info about the Financial Statements in your Documents library:

The Documents area contains monthly financial statements:

Owner Portal Documents
  • The statements in the Documents are are static documents. They are posted to the portal once a month to serve as a historical record of financial performance. 

Download a statement to see month and YTD financials:

Owner Portal Property Statement

You'll also find a month-over-month operating statement:

Month over Month Statement

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

Commincation Dashboard Screenshot
  • The communications module will contain a record of all messages that you create through the portal. 

Click the "New Message" button and send your message:

Owner Portal New Message Screenshot

Responses will show up in the conversation ticket:

Portal Conversation Response Screenshot
  • You’ll get an email notification whenever you get a response, and you’ll also see the message in your portal next time you log in. 

You can reply in-line using the comment box:

Owner Portal Comment

Each conversation will be logged in its entirety:

Portal Conversation Snapshot

Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

Owner Ledger Dates
  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

Ledger Property Column
  • You can filter the ledger to look at just one property, all properties, or specific sets of properties. 
  • If you only have one property with us, you’ll just see the ledger for that property. 

The Description column displays the transaction type:

Owner Ledger Description Column
  • BILL: this is an expense transaction, such as for repair costs or management fees.
  • CHARGE: this is a transaction  billed to the tenant, most typically a rent payment. 
  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

Owner Ledger Amount Column
  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

Owner Ledger Account Balance Column
  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

PW Portal Filters

View a snapshot of income and expenses on your dashboard:

PW Owner Dashboard View

See every transaction in real-time on your ledger:

Owner Portal Ledger View

Statements and forms will be posted to your documents library:

Owner Portal Document Library

View a suite of real-time financial reports:

Portal Reports View

See a running list of all bills, and drill down for more detail:

Owner Portal Bills View

Under Bill Details, you'll find dates/descriptions/amounts and more:

Portal Bill Details

You can also communicate with your Account Manager through the portal:

Owner Portal Communication Tools

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

Net Distribution

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.