Investing in residential real estate and adopting a strategy of buying and holding properties can be a smart and rewarding financial decision for multiple reasons.
Don’t take my word for it…just look at this example:
In 1971, the interest rate for a primary residential mortgage was 7.33%. If you waited for interest rates to go down, you wouldn’t have purchased a home until 1993.
You would have rented for 22 years waiting for rates to go down. Over those 22 years, the value of residential real estate essentially quadrupled. Don’t wait to buy real estate…buy it and wait.
Marry the house, but date the rate, as you can always refinance when rates go down.
Consistent Appreciation
Residential real estate has historically shown the remarkable ability to appreciate in value over time with relatively little risk. While market fluctuations do occur, long-term trends clearly indicate an increase in property values. See the chart below:
Only 7 times in the last 80 years has real estate decreased in value!
This appreciation can lead to substantial gains for investors who hold onto their properties for extended periods, building significant wealth through asset appreciation.
Rental Income
Additionally, rental income generated from residential properties offers a consistent cash flow stream. Owning rental properties can provide a steady source of income, helping investors cover mortgage payments, property maintenance costs, and potentially yield profits.
Moreover, as rents tend to rise over time, owning residential real estate can provide a hedge against inflation, with rental incomes increasing along with housing demand.
Leverage
Another advantage of buying and holding residential real estate is the ability to leverage. Real estate allows investors to use leverage by financing a portion of the property’s purchase price through a mortgage.
This means investors can control a more substantial asset with a relatively smaller initial investment. As the property appreciates, the equity in the property grows, amplifying the return on the initial investment.
In Conclusion
Buying and holding residential real estate is one of the best wealth related strategies due to the potential for long-term appreciation, consistent rental income, and leveraging future opportunities.
Please do reach out to me for more, as it would be my pleasure to do some long term planning analysis to help you reach (and even exceed) your financial goals!
