The Real Estate Buy And Hold Strategy Is Back

During the boom times, I used to attend 15-20 property exhibitions per year. I can´t remember anybody at these shows advocating a buy and hold strategy. It was all about buying offplan and then selling for a big profit shortly after completion. Many a taxi driver, publican and dinner party host could be heard advocating a "buy now before prices go even higher" approach.



In hindsight, that turned out to be a pretty risky way to try and make some money. It was also miles away from the traditional methods advocated by old hands.



I have a lot of sympathy for people who are suffering now because of investment decisions made near the top of a market. Ironically though, it is easier to make money purchasing real estate now even though many might instinctually prefer to wait until the opportunity has passed.



While I´m convinced that making a profit by buying real estate is both easier and safer than it was 5 years ago, it doesn´t happen quickly and it certainly doesn´t involve borrowing lots of money.



There´s no great secret here, the strategy couldn´t be simpler. Here goes: buy a highly discounted property with cash (no interest rate risk), in an established location, earn a nice income, treat your tenants well, and hold onto it for as long as you can. Consider selling only when the statistics and your gut tell you the market is showing signs of another property bubble.



I´ll be the first to admit that this isn´t an exciting plan, but you know what? It works. Very well. Just look at the table below. All I´ve done is illustrate the net income that can be earned from any half decent three bed condo in Florida. Apart from earning 150% of your purchase price, you still own a property outright with no mortgage that you bought for 35 cents on the dollar.



Purchase Price 2011 $100,000



Annual Net income (increases by 3% per year)



Year 1 $8,000

Years 2-5 $34,473

Years 6-10 $49,237

Years 11-15 $57,080



Total net income $148,790



Before any of you young guns reading this dismiss such as strategy as unsuitable, consider what the great American economist Paul Samuelson said, "investing should bemore like watching paint dry or watching grass grow. If you want excitement, take $8,000 and go to Las Vegas".