BiggerPockets

There are short and long term strategies in RE investing. Long term strategies are less effected by current market conditions. Short term strategies must continuously factor in current market conditions.

A buy & old strategy is a long term investment strategy, IMO as long as you are buying right with cash flow in mind you will see appreciation over time. I doubt that anyone can accurately forecast were housing prices will be in ten or twenty years, but my guess is there will be reasonable appreciation over time.

You should become very familiar with your market. IMO it seems that Florida is likely to always be a place to retire. As the economy improves I suspect you will see renewed appreciation in many Florida areas.

So, should you invest in buy and hold. I don't know? You financial situation is going to play a factor in the decision, you should have reserves set aside, the strategy is a slow but steady way to grow wealth.

As mentioned by Charles & Bryan, cashflow is the key for buy-and-holds ... one can never predict the bottom but it it's spinning $$ off every month then you'll be able to weather (and enjoy) the next few turbulent years before housing settles and hopefully appreciates.

You can use the predictions that the market is going down to negotiate a better price.

If you are long term buy and hold, it doesn't much matter what the current market value is. The only time sales price is a consideration is when you are actually selling.

Buying for long term hold is slightly different. You want to buy in areas that have the potential to go up in value. You also want to avoid areas that are slipping down into ghettos or that have some sort of long range government plans that are going to hurt values.

Don't buy were the city is placing a sewer plant 5 years from now.

I recommend areas that have something desirable about them: good weather, growing populations, close to water or outdoor sports activities. In short, buy places that people are going to want to live in, over other locations, if they have a choice about it.

Rich - Thank you for the post. You've mentioned in your profile that you've picked perfect areas for appreciation in your lifetime. Is SWFL your current location of choice for future appreciation?

Tony- I picked SWFL as my next area and the jury is still out! I've only bought a home to live in and a Self Storage Faqcility so far. Trying to purchase sfrs currently and it is not as easy as I had anticipated.

Bryan accurately portrayed the areas I like. So texas primarily and all of Texas as secondary. Least interested in Houston and that seems to definitely be a contrarian view. Rich

Dupe, sorry

Personally, I think it's about the right time to buy. Prices are down, inventory is up, sellers are often highly motivated, and interest rates are low. It's a good combination. That said, markets always over-react at the top and bottom so timing might not be perfect, but I am optimistic.

Here is something else that starts to happen when prices drop too much (I heard that some of this happened in Detroit during the downturn). Early in the declining market, owner occupants sell just to get out without losing too much, and investor buys to hold as a rental since it will cash flow positive. Or the owner is foreclosed upon and the investor buys an REO that cash flows positive (type of purchase isn't really a factor). So far, so good.

As this continues, investors start to realize that they will cash flow positive with lower rents when they can buy lower. Eventually, those who bought to hold earlier end up being unable to sustain the original rents they were getting, and they then rent it for what the market rent drops to. At some point, cash flow becomes negative.

So, as long as you can be confident that rents won't decline while you are in the holding period ...

I always look at "dollar cost averaging."

If you buy a house for $100,000 that rents for $1,000 and the price goes down to $90,000, but another one that rents for $1,000. If it goes down to $80,000, buy another one.

Of course your personal finances will dictate how many you can buy, but cash flow is very different from value. Trying to time the "bottom" of the market is a magic trick that mankind has been trying to do for milleniums. Less than 1% actually get it exactly right, but you always hear about them because they then think they are a GURU because they got lucky and start selling books, tapes and seminars.

So just look at the investment IN THE PRESENT. If the cash flow, IRR, Cash on Cash, Cap Rate and any other gauge you use is good, buy it. If not, move on.