When determining what investment strategy to pursue, most experts agree that the "buy-and-hold" technique yields a decent return on your investment. Whether you are just getting started in the world of Sarasota real estate or have been in the investment business for a while, this method will work well to give you a consistent income flow long-term.
How Buy-and-Hold Investing Works
In case you’re not familiar with buy and hold, let’s review how this real estate investment strategy works. The buy-and-hold strategy consists of buying real estate and then holding on to it for some time. When you juxtapose that with "fix-flip investing," you quickly see how it reached its name.
One benefit of holding property—as opposed to trying to turn it quickly—is being able to rent it, which brings in passive, long-term income. This popular investment strategy delivers both short-term and long-term benefits:
In the short-term, you have a stream of passive income flowing in from the rental income.
In the long-term, you can sell the home for a higher price later on down the road.
Let’s take a closer look at how this traditional investment strategy benefits investors in Sarasota.
Why the Buy-and-Hold Strategy Works
What are some top reasons why the buy-and-hold method works so well for real estate investing in Sarasota?
Consistent Flow of Income
If you’re looking for a truly passive income, then the buy-and-hold strategy lays the foundation. Every month, you can look forward to the rental income that will flow in from your investment properties in Sarasota.
Of course, to ensure it’s truly passive income, many real estate investors hire an expert property management company in Sarasota to mitigate the time and energy sink of managing investment property. According to some reports, Americans spend an average of $4,958 a year on home repairs! With their connected network of contractors, property managers in Sarasota help keep your investment sparkling while upping your potential for profit.
Compounding Effect of Appreciation
Steady cash flow from rentals is not the only thing that earns investors revenue: appreciation is another significant factor in income generation when you hold your Sarasota investment property long-term. Compounding interest can have a considerable impact on the amount of money you’ll bring in.
This is especially relevant when you take into consideration inflation. However, appreciation only works in your favor if you have rentals that are in ideal locations. Otherwise, your homes could depreciate—and you’ll lose money. When you choose a property management company in Sarasota that understands the markets here, you’ll have help finding investments that lead to profits.
Tax Breaks and Deductions
As an investor, you know that tax breaks can considerably support your investment efforts. When you cash in on the deductions and tax benefits for which you’re eligible, then you keep more of your hard-won income.
Real estate investors gain several tax breaks that increase your savings—thereby padding your profits. Some of these deductions include:
Private mortgage insurance
Repair and property maintenance expenses
Financial and accounting fees
Educational expenses about real estate
Easier Long-Term Management
No matter what the task is, the beginnings of a project are always the most challenging. The same can be said for the real estate investing business, too. After you've learned the ropes with one property, you can expand to another. This is even more applicable when you work with a property management company in Sarasota to grow your investment portfolio.
For one thing, if you have the aid of an expert property management company, you can focus on what matters: the financial growth of your investments. Leave your Sarasota property manager to handle the menial—but crucial—work of maintenance, lease signings, and inspections. They keep the engine of your investment machine running strong while you focus on expanding your empire.
Secondly, as you get in the rhythm of buying, renting, and potentially selling your investment properties, you will become more familiar with a good investment in Sarasota when you see it.
Stabilized Net Worth
In any business, it’s critical to have a stable net worth.
Net worth is calculated by adding all your assets together, such as your properties.
Subtract the liabilities or debts you owe.
The remaining number is your net worth.
When your liabilities are higher than your assets, you have a negative net worth, and when your assets are higher than your liabilities, then you have a positive net worth.
You are in business to earn income—so you obviously want to maintain a stable, positive net worth. If you begin to dip into negative net worth, it won’t be long before financial trouble may arise. Additionally, not only does a stable new worth help with how lenders view you, but it is also beneficial for your goal planning. You’ll be able to look far into the future to make plans because you’re used to the ebb and flow of income and expenses.
Support for Your Sarasota Investment Portfolio Is Within Reach
Long-term wealth through investment property is built upon the buy-and-hold method of investing. This classic strategy of gaining profit through property is a mainstay for a reason: it works!
Take advantage of this method and watch your gains keep gaining; just be sure you have the aid of a qualified property management company in Sarasota to help you make wise choices. At Real Property Management of Sarasota & Manatee, we know what it takes to keep growing the investment portfolio you started. If you need support to help tackle the tasks that can bog down your investment efforts, reach out to us!