Buy & Hold Real Estate. A Way to Recession-proof Your Portfolio.

Buy and Hold Real Estate now.

Now is the time to create stability in your portfolio and investment strategies.  Due to the economic impacts of COVID-19, we are feeling unrest in the economy.  Counties, states and cities are coping with the economic downturn by trying to re-open local economies, encouraging consumer spending again.  While in some counties, we see tentative successes, it can not be ignored that the vast population of Americans, a third to be exact have filed for unemployment benefits and others are experiencing furloughs. With these changes, still comes opportunities for investing success.  Buy and hold investing strategies are those I highly recommend now.  Here's why. 

 As previously mentioned, buy and hold real estate allows for both short-term benefits (cash flow) and long-term benefits (appreciation).  To the point, appreciation is the increase in an investment property's value over time. Like any other market, the real estate investing market moves in cycles, but those who ride out the lows with accurately applied strategies, see stability and success - regardless of the cycle.

Here are a few things to consider in long-term investing.

Fix and Flip is a typical investing strategy but must be done correctly. First, what's your exit strategy? How long will you hold the property before placing it back on the market? How will you purchase the property - self-directed IRA, cash, hard money loan, or a mortgage? This determines the profits you enjoy at the sale of the property. If you over-paid for the investment, consider holding the asset until the market is in your favor and profits are clear. Keep in mind, if you choose this avenue, repairs to the property can be done over a period of time, giving your the opportunity to enjoy profits in your monthly spread of residual income and possible tax benefits and write-offs. By the way, I ABSOLUTELY LOVE TAX DEED SALES FOR BUY AND HOLD REAL ESTATE. If you would like to like for MCE and MoguLife Real Estate to provide you with leads and access to properties, without the hassle of tax auctions, please contact us by clicking here.

Here's a huge benefit to not flipping fast. It's appreciation Appreciation compounds, which is the real wealth generator in real estate. Think about this. You purchased a rental property valued at $100,000. If properties in the area appreciate at an average of 5%, that property will be worth $105,000 the following year. In 15 years, that property will be worth about $207,892! 

Long-term investing often hedges risk. This means that overtime, if you did not get the best value when purchasing the property, the rents will typically increase over time and appreciation will increase the building’s value, allowing you to eventually earn a profit in addition to positive cash flow. Be aware , when you decide to sell after a long-term holding period, it could be subject to long-term capital gains tax.  As always, my advice to you is to please consult with your tax professional prior to making any tax decisions, and remember all professionals are not equal. You will need someone with experience in real estate transactions as well.

There are real benefits to buy-and- hold-investing and for now, we have to position ourselves for immediate and long-term wins. 

This emerging market will dictate that we become more savvy and strategic in planning our portfolios.  Here are a few benefits to this long-term investing strategy:

  • Consistent cash flow (You'll need to diversify your client profile to maximize the current and emerging market.)

  • Equity for to self-finance investing (This is a solid strategy to consider of banking regulations become an issue, we well as other self-financing strategies.)

  • Goal planning. (leverage is the key here.)

  • The compound effect of appreciation. ($$$)

  • Tax benefits. (These can really become major benefits if you own a home-based business or operate for a period of time from home. See you tax prep expert for current list of write-offs. and make sure the professional is versed in real estate investing transactions.  This matters!)

  • Easier management over time. (I strongly advise you to factor in property management in this scenario. You want to focus on "running your business" not "working your business".

  • Stable net worth,  $$$$$$$

More will be discussed in class tomorrow. Register here.

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