“Buy and Hold” Investing

There are many different ways of investing in real estate. Real Estate Portfolio Builders focus on the very simple technique of buying real estate and holding it (“buy and hold”). Although the “buy and hold” technique is simple, the ways of using this strategy are diverse. Buy and hold investors may be individuals who purchase a single property as an investment and rent it out with an idea of selling it to fund retirement. It may also be a family that purchases and new home but decides to rent out their old home. There are also full-time real estate investors who buy many properties each year and either managing the properties and their tenants themselves or paying a management company to fill vacancies and maintain the properties.

Real Estate Portfolio Builders

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Other Real Estate Investment Methods

Discussed below are a variety of techniques for earning money through real estate. While each of these techniques is used in various areas, some states or counties have limited or barred use of certain techniques. Attend your local Real Estate Investment Club or check with your real estate attorney to seek guidance on any laws or regulations that may preclude the use of a specific technique.

For individuals who have time but no money, “bird dogging” or “wholesaling” may be an option. Bird dogs find abandoned or run down properties for investors. Depending on the needs of the investors or the ability of the bird dogs, the bird dog may simply provide an address and pictures of the property and be paid a nominal fee if the investor purchases the property or may learn about the property, its ownership, and even if the owner is willing to sell and if so, at what price. The more a bird dog does the more his or her ultimate payday by the investor. Of course, the more the bird dog does the more time is invested in each project and if the investor does not purchase the property, the bird dog is not paid for his or her efforts.

Unlike bird dogs who do not actually contract to buy the property, wholesalers get a property under contract at substantially below market rates and sell their right to purchase the property to an investor. Generally, wholesalers seek homeowners who need cash fast or properties that need significant rehabilitation to get significant discounts. Note, unlike “flippers” or “rehabbers” who purchase a house, make repairs, and then sell the house, wholesalers generally sell the contract to purchase the house and make no repairs to the house.

Rehabbers range from individuals or companies who purchase homes and make necessary but minimal repairs such as drywall patches, painting, and pressure washing to individuals or companies that purchase “shells” and work with construction crews to fully gut the property and install new systems.

Just as the scale of rehabs differ, so does the involvement of the investor. Many investors play an active role in the rehab by mudding drywall or sanding floors. Other rehabbers limit their role to keeping tabs on expenses with their general contractor and writing checks.

Generally, rehabbers buy an ugly house at a cheap price, repair and update it and sell it at a retail price. Retail buyers are generally not investors. Retail buyers are purchasers who usually purchase a house to live in.

While rehabbing can be passive (writing checks to make things happen) to very active (repairing the house yourself), the ultimate passive real estate investor is the private lender. Private lenders provide money to real estate investors enabling the investor to capture a deal quickly. Generally investors pay premium interest rates for the use of the lender’s money and generally the loan is secured by a mortgage.

Although investors who buy and hold generally purchase properties with the plan of holding them long term, they can (and do) use any of the above techniques to invest in real estate. For example, a “buy and hold” investor may learn about a property that is grossly under priced but not in an area where the investor wants to hold property, the investor may get the property under contract and wholesale it to another investor.

To help an investor focus on whether a property is a good investment vehicle, we have developed a “Property Form Safety Check” that uses internet resources to help you determine if a property is one that you should purchase as an investment. The “Safety Check” form is FREE. Just click on [Contact Us]