Real Estate Strategy
Buy & Hold Rental
Purchase property and hold it long term for rental income and appreciation. The most reliable wealth-building strategy in real estate — when done right.
How It Works
You purchase a property — single family, duplex, small multifamily — rent it to tenants, and hold it for years or decades. Cash flow from rent covers your mortgage and expenses, with leftover income as profit. Over time, the property appreciates and your equity grows as the loan is paid down.
The goal isn't a quick return. It's building a portfolio that generates consistent income and builds net worth over time.
Key Numbers to Understand
Gross Rent Multiplier (GRM)
Purchase price divided by annual gross rent. Lower is better. A rough first filter.
Cap Rate
Net operating income divided by purchase price. Measures return without financing. Target depends on market — 5–8% is common.
Cash-on-Cash Return
Annual cash flow divided by cash invested. This is what you actually earn on your money each year.
Vacancy Rate
Assume 5–10% of rent won't be collected. Factor it in. Most new investors don't.
CapEx & Maintenance
Budget 5–10% of rent annually for repairs and capital expenditures (roof, HVAC, plumbing).
Typical Funding
Unlike flips, buy & hold properties can use conventional long-term financing — which means lower rates and better cash flow.
- —Conventional mortgage — 20–25% down for investment properties. 30-year fixed gives predictable payments and maximizes cash flow.
- —DSCR loans — Debt service coverage ratio loans qualify based on property income, not personal income. Good for investors with multiple properties.
- —Portfolio loans — For investors with multiple properties, portfolio lenders bundle them together under one loan.
What Makes Them Work
- —Positive cash flow from day one
- —Strong rental market with low vacancy
- —Conservative financing (fixed rate, reasonable LTV)
- —Properties in landlord-friendly markets
- —Disciplined tenant screening
Common Mistakes
- —Buying in weak rental markets
- —Underestimating expenses (vacancy, CapEx, management)
- —Over-leveraging — too little cash flow buffer
- —Ignoring property management costs
- —Chasing appreciation over cash flow
Is Buy & Hold Right for You?
This strategy works best if you:
- —Want steady, passive income over time
- —Can qualify for conventional financing
- —Are investing in a stable or growing rental market
- —Have a long time horizon (5+ years minimum)
- —Are prepared to manage or outsource property management
Have a property you're analyzing? Send me the numbers and I'll give you honest feedback.