The Buy and Hold investor Vs the Investor/Trading

[Don Konipol]

I’ve been, and I am, both a buy and hold type investor and a trader type investor.  Often has depended on the economic situation, the type of properties I was (am) interested in, and the deal flow that passed my way. 

In the buy/hold category, price is less important.  I could purchase property at fair market value (no discount), and if the property was in good shape, in an appreciating, growing area (especially a GENTRIFYING area), and could be rented out initially for a break even or positive cash flow, I usually did very well thru appreciation, rental rate increases, tax benefits, and loan amortization. 

The “opportunistic” trading type investments (deals) I did (still do!) require a lot more time commitment, effort, knowledge, experience and “tenacity” to pull off.  For me, the best of these occur when either (1) the property can only be sold for cash - no financing is available, (2) the seller needs to sell immediately and is more concerned with total price than anything else, and will provide seller financing on “sweetheart” terms”. 

An example of the first is high rise condos I purchased in Phoenix in 2011 -2012 - because the owner occupancy was below Fannie Freddie FHA guidelines, these could only be "cash only" deals. So the result was that these high end condos were trading at 1/2 the value they would be if financing was available. I held the condos 5 -7 years; had a great 8-9% annual cash flow, and sold them for 100- 150% gain.

I’ve utilized seller financing on both ends - the best of the “deals” were the ones where the seller took back 70-80% of the purchase price in a 0 percent interest loan - ALL my monthly payments were a reduction in principal.  I was able to do this for anywhere from a 7 year loan to a 15 year loan.  I turned around in each case and resold the property for either the same down payment and same price but with a wrap around note at 7 - 9% interest; or sold with a smaller (10%) down payment and a wrap at 12% interest.  As a side note I would state a period of 7 years where the buyer could NOT pay me off, since my profit was in the financing.  

How about you?  Where have you had your most success? 

[Chris Seveney]

We have had success on both fronts - the buy and hold has done very well for us in appreciating markets but not so much in low priced low appreciation markets. Have a property we bought and renovated 10+ years ago and since that time it has gone up 2.5X

also the transaction type deals whether they are notes and real estates has also seen a lot of success. For example we recently took a property back, put $300k into it and sold it and that $300k netted us a gain of $600k for the fund

I am always a fan of a balanced portfolio and having a mix as even though I highlighted some nice wins also have some stinkers.