Real Estate Buy And Hold Case Study

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Today’s blog is a follow-up to last week’s post (The Return Of The Real Estate Buy And Hold Strategy) in which I promised to show a case-study of this principle. I have chosen to do this in two-parts. This week will show a real-world “already done” investment where a property was purchased during a buy cycle, held for 16 years and sold during a sell cycle.

One important point about this property is that it was my first purchase and I had no idea of what I was doing. I paid full price to a builder for 1 side of a brand-new duplex and then proceeded to lease it out from 1992 until I sold it in 2008. The reason that I chose this property is that it truly demonstrates the power of “time” in making a real estate investor look smart.

Purchase Price $59,900.
Initial Investment: $2,921
Condition: Brand New
Initial Rent: $500 / month
GRM: 9.98
Sales Price: $120,000
Buy And Hold Real Estate Investment Image

Calculating ROI For A Real Estate Buy And Hold Investment

In order to truly assess the return for any investment, the prudent investor considers the inflows and outflows of money at all times. In the real world, it is rare that money is placed into an investment at the beginning, and then money is returned at the end, without any flows in the middle. In the case of a leveraged real estate investor, this certainly is the case.

In the investment above, the total cash “out of pocket” at inception was $2,921 (roughly 5%), so the leverage exceed 95%. The following are the real cash flows during the entire ownership of the property:

Real Estate Buy And Hold Case Study Summary of Cash Flows In A Real Estate Buy And Hold Analysis

The operating cash flows (including the investment as the proceeds from the sale) present a clear picture of the lesson one should learn from the real estate buy and hold strategy….

The bulk of the return is in the sale. Note that on a “no money down deal” it is highly likely that an investor will experience negative cash flows for quite some time. I was able to finance this property (at much higher interest rates than today) with very little down and therefore I was able to experience an annualized rate of return of 27%.

Considering I was 26 years old and a total novice when I purchased this property, I think I did OK. I wonder how many people realized an annualized return of  27% in their retirement portfolio during this same period of time. Remember, this was a fairly passive investment, with a property manager handling the management service after the first few years.

Buy And Hold Real Estate Strategy Requires Time And Patience

This investment reveals the simplicity of a successful buy and hold strategy for real estate investment. It also shows the non-importance of “stealing” a property. I purchased this townhouse at market value and held it until the real estate cycle was in a sell-mode. I actually held the property for two years too long and my ROI would have been quite a bit higher had I sold in 2006.

The next post in this series will include a property that I “grab” from the MLS and do a forward-looking proforma on the property. We will use some analytical prowess to select this property as well as some market experience too. I am confident that we can find a property that will yield greater than 30% ROI for a long-term buy and hold real estate investor.

About Author

Joe Manausa, MBA is a 20+ year veteran of real estate brokerage in the State of Florida and has been investing in real estate since 1992. He is a daily blogger with content that focuses on real estate analytics and investing in the residential market.


  1. Joe,
    Thanks for the post. I really appreciate reinforcement to the Buy and Hold strategy. My wife and I purchased a multi-family 6 years ago. We purchased a single-family to grow a family a year ago but I am anxious to purchase another investment property. I completely agree with your point that you don’t need to buy at a steal. Often I think buyers focus more on getting a steal than the long-term potential of a property. I highly recommend the book Buy and Hold by David Schumacher, Ph.D. It is a great book that does a great job of reinforcing the points you have made and also emphasizes the importance of considering location in the purchase.
    Warm regards,

  2. I will give no argument that real estate investments are the way to go. That said, I would have to partially disagree with the statement of “stealing” a deal. Immagine what your IRR could have been had you searched for a property with a motivated home seller in which you could have purchased for 20% under market value. Point is, you do not HAVE to steal a deal, but it certainly does not hurt.

    • Thanks Will. Sure, anything you can do to increase your IRR is smart. The point is that because “leveraged appreciation” is the great portion of the IRR, stealing the property has much less impact than the structure of the deal. Run some numbers and see how purchase price is far less important than proper leveraging and cash flow.

  3. Most of my buyers are going for value add deals. B or C apartment 50 to 100 units plus with deferred maintenance.

    You can get a 12 to 15% cap going in buying with cash.

    I am sure you depreciated your asset over the years.What did you do with the recapture and capital gains??

    Did you 1031?? Is that 67,306 before your selling costs.Brokerage commission,buyer closing costs,etc.??

    I think you did okay but I would want much higher returns.

    You can find a 500 rent for 15,000 to 25,000 in my market. I love the graph you made though.

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