How to Build Wealth With Rental Properties Through Buy & Hold Investing

15 min read
Jay Chang

Jay is currently the Director of Real Estate at Tripalink, a co-living startup based in Los Angeles, California. Most of their projects are ground-up multifamily projects. His passion and goal are to transform apartments by integrating community events and co-living units, allowing the residents to live conveniently and happily at an affordable price.

Prior to Tripalink, Jay launched his own company in Cambodia in 2020 and worked at CIM Group in 2017 as an Analyst. His experience includes entitlements, cost management, investment analysis, and construction management for ground-up projects, such as apartments, mixed-use, and hotels.

Some of the notable projects are the PRIZMA Apartment and the luxurious EDITION Hotel in West Hollywood and the R3 Metropolis with 60-story and 27-story towers in Downtown Los Angeles.

Jay holds a cum laude civil engineering degree from UCLA. During his free time, he travels, plays basketball, hosts potlucks and board games, and reads.

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When you’re getting started in real estate, the scope of possible investments can feel daunting. Do you want to focus on rental properties? Or do you dream of fix-and-flipping? Perhaps you’re a wholesaler in the making or eager to invest in notes.

But of all the investment options, there’s one first-time investors turn to time and time again: rental properties. This method—also called “buy and hold”—involves (as you might guess from the name) buying property and holding it as a long-term investment. Instead of immediately “flipping” the property by selling it to a new buyer, buy and hold investors rent it out.

What is buy and hold?

Buy and hold is a residential real estate investment strategy in which an investor buys a property they plan to own over a long period—anywhere from five to 30 years. The value increases over time, and the investor enjoys a stable monthly cash flow from the rental income. These properties can be single-family homes, apartment buildings, or other multifamily options like duplexes and triplexes.

Once the property’s value exceeds the money the investor put into the property, they can sell for a profit. (Or keep receiving rental income.)

Skipping the “rental” portion of buy and hold isn’t typically an option. In most cases, investors can’t leave rental properties vacant over time and make money. If they do, the property can fall into disrepair and reduce or eliminate the investor’s profit when they decide to sell.

Buy and hold cash flow should cover, at a minimum, the cost of owning and maintaining the rental property—including the monthly mortgage payment. Essentially, the monthly rent income exceeds the property’s monthly ownership cost. If so, the investment property provides the investor with monthly positive cash flow.

That’s why, in a buy and hold strategy, an investor makes money in both the short and long terms.

  • In the short term, the investor earns cash flow by renting the property to a tenant.
  • In the long term, the property’s value appreciates. The investor makes money when they sell the property.

Let’s get started.

Buy and hold vs. other investment strategies

Buy and hold is one investment strategy, but real estate investors have a few other options.

Fix and flip vs. buy and hold

Deciding between flipping vs. renting can be a challenge. A “fix and flip” is when an investor buys property with the intent of selling it for profit as soon as possible. Often, investors following this approach purchase single-family real estate that needs rehabbing to make it livable or more desirable to buyers. The idea is that the investor buys a property that, with some work, they can sell for more than the cost of the house and its rehabilitation.

Getting the property fixed up and sold quickly is crucial. Investors don’t want their equity—or the value of their investment—tied up in a property for longer than necessary. Plus, if they financed the purchase, they’re accumulating interest on that loan. The longer the investor owns a fix-and-flip property, the more they pay.

And fix-and-flip investors don’t usually rent out their properties, which means they don’t have monthly cash flow. Instead, they want to make a profit by selling it.

Many investors use both fix and flip and buy and hold strategies to grow and diversify their portfolio.

Value-add strategy vs. buy and hold

Purchasing and renovating an underperforming property is another common investment strategy. It typically requires a few years to turn the property around, but the increase in the property’s cash flow and value is gratifying. One common value-add strategy is BRRRR, or “buy, rehab, rent, refinance, repeat.”

Relative to buy and hold, a value-add deal requires more experience and is riskier. Renovating units is not as simple as it sounds—you need a good understanding of the market to know exactly what the local renters want in terms of finishes and needs. Adding a new swimming pool or washer/dryer in the units, for example, is even more difficult.

Real estate investment trusts vs. buy and hold

Investing in a real estate investment trust (REIT) is often the easiest and least risky way to invest in real estate. A REIT makes money by building, owning, managing, or financing real estate.

Just like with other companies, you can buy ownership shares—or stock—in a REIT. The value of your REIT shares goes up if the REIT does well. Most REITs pay a regular dividend, so you can earn some money while owning a REIT stock.

But shares in a REIT usually generate less return on investment (ROI) than owning real estate. And any dividend you earn through a REIT will be less than the rent you can collect from a buy and hold property.

Wholesaling vs. buy and hold

Wholesaling is when an investor finds a property for sale for less than market value. The wholesaler contracts with the home’s seller, then finds a buyer for the property.

With wholesaling, an investor can make money in a short amount of time—and they don’t have to deal with rehabbing a property or being a landlord. But wholesaling requires strong sales tactics. The wholesaler must convince a property owner to sign a contract with them and then find a buyer.

Real estate wholesaling also comes with a lot of pressure. For example, a wholesaler may get stuck with a property if they fail to find a buyer or lose money if they cannot find a buyer willing to pay their asking price.

Buy and hold vs. BRRRR

The BRRRR method is actually a slightly fancier version of buy and hold. BRRRR stands for “buy, rent, rehab, refinance, repeat”—the main difference being the rehab and refinance portion of the process.

BRRRR guide 1

Systemize your investing with BRRRR

Through the BRRRR method, you’ll buy homes quickly, add value through rehab, build cash flow by renting, refinance into a better financial position—and then do the whole thing again. Over time, you’ll build a real estate portfolio that’s the envy of your fellow investors.

Advantages to the buy and hold strategy

Not sure if you’re ready to dive into residential investments? Learn the advantages of this strategy before you get started.


Over the long term, real estate usually appreciates, or grows in value. This appreciation is the main reason an investor pursues buy and hold rental properties. The longer they own the property, the more its worth increases.

Rental income

Investors can make money from their buy and hold properties by renting them out, creating consistent monthly cash flow. Plus, this means they don’t have to wait to sell the real estate to generate revenue.

Many buy and hold properties produce 4% to 10% return on investment (ROI) from rental income alone, depending on the market location.


Owning real estate can help fund other investments. For example, an investor can leverage the equity in their buy and hold rental properties to finance other real estate investments.

Principal pay down

The principal is the amount of money owed on a loan. Investors can use rental money generated by their buy and hold investment property to pay down the principal on that property’s mortgage. The loan earns interest based on the amount of principal remaining—so the faster you pay down the principal, the less interest you’re charged over the loan’s lifetime. Plus, you’ll have more equity!

Tax benefits

Owning real estate, including investment rental properties and personal single-family homes, provides tax benefits. Tax deductions you’re eligible to take on an investment property include:

  • Mortgage insurance premium
  • Mortgage interest
  • Property depreciation
  • Repair and maintenance costs
  • Property taxes

Hedge against inflation

Properties appreciate over time, especially if inflation goes up. That’s why the buy and hold strategy can protect your investment portfolio if inflation rises.

Increasing profits over time

Rent increases alongside cost of living. However, the cost for expenses such as administration, maintenance and repair, and property management fees also goes up over time. Luckily, debt service and property tax stay relatively the same, so in the long-term, your profit margin widens.

Passive income

If you hire a great rental property management company, buy and hold investments are reliable sources of passive income through consistent cash flow. In addition, your investment portfolio can provide money during retirement or for medical or family emergencies.

Flexible exits

The idea of a buy and hold strategy is that you own an investment property for an extended period. But in most cases, you can sell whenever you want. No contract or agreement forces you to own a buy and hold property for a specified length of time. But, of course, if you used a loan to buy the property, you’re obligated to pay off that mortgage.

More on buy and hold advantages from BiggerPockets

Buy and hold considerations

While there are many benefits to buying rental properties, the strategy does have some drawbacks. Here are some of the risks of owning rental property.


It’s important to estimate rental property expenses before your first buy and hold purchase. If you financed your buy and hold purchase, you’ll owe monthly mortgage payments on the purchase price and interest. You’ll also need to pay to maintain the rental property for your tenant. And while renting does generate income, you must plan for tenant turnover.

A best practice is to keep one to three months worth of expenses for emergency use. Doing so ensures you can pay your bills even if you’re unable to find a tenant.

Lack of appreciation

The underlying principle of buy and hold is that real estate appreciates over time. That’s not always the case in every location, though. Buying a property doesn’t mean it will produce a profit for you down the road. Likewise, there’s no guarantee of a property’s value when you need to sell it.

Let’s say you encounter a financial emergency and need to divest yourself of your buy and hold properties. You may not make a profit, and you can even lose money if you sell your real estate before it appreciates.

Property management

Buy and hold isn’t always a hands-off investment strategy. Understand the breadth of potential property management tasks before determining if this strategy suits you.

If your property needs any rehabilitation work, you’ll need to manage that project. If you’re renting your property, you need to find a tenant, collect rent, and address maintenance issues. Handling these items can be stressful and take a lot of your time. You can hire a property management company to take care of them, but doing so can eat into your profit margins.

Buying rental property

There are a few crucial factors to focus on for buy and hold properties. Here’s what to look for when buying a rental property.

Pick the right location

First, you need to think about location. For a buy and hold approach, you want to own for the long term. That means you’re not necessarily looking to acquire a property in the hottest market, since then you’ll likely pay a premium for the property. The more money you spend acquiring an investment, the higher your mortgage payment will be. And the costlier your loan, the more you need to charge for rent to cover your expenses.

Real estate in more expensive areas may appreciate less than property in more affordable locations. If you’re buying a fix and flip property, getting something in a trendy city or neighborhood might make sense. In a buy and hold strategy, though, you’re playing the long game.

Look for markets where people want to live, but at a price that has room for appreciation. Some questions to ask when deciding on a rental property location include:

  • Are people moving in or out of a market or neighborhood?
  • How’s the local economy? Are there jobs available? How’s the job diversity?
  • What’s the average home appreciation for the location over the past 20 years?
  • What’s the cost of living for the market? How does that cost compare to comparable cities in that region and the country?
  • What’s the market’s average rent for what you’re considering buying, such as a condo or a two-bedroom house?
  • Is the neighborhood safe? What are the crime rates?

Picking the right location is a significant part of a buy and hold investment strategy. After you’ve chosen where to buy, you need to know what you can spend.

market analysis guide

How to Analyze Real Estate Markets

Whether you plan to flip a home or buy and hold a property, an accurate real estate market analysis is key to your success. If all that sounds overwhelming, don’t fear. This guide explains exactly how to perform a market analysis, which will help you decide if an individual property matches your investment targets. 

Budgeting for your investment

How much you spend buying rental property determines how much you’ll make. Set a budget and make sure to stick to it—including estimating rental income, cash flow, expenses, and maximum purchase price.

By now, you’ll have an idea of what average home prices are in your market. You’ll also know how properties tend to appreciate and what the average rents are. Then, you’re ready to set your budget.

You need to allocate money toward buying the rental properties and getting them ready to rent. Account for property taxes, loan interest, insurance premiums, and any costs for finding a tenant. Plus, you want to keep one to three months of the property’s expenses saved.

Some items to consider when deciding how much to spend on acquiring a buy and hold property:

  • How much monthly rent can you charge?
  • If you’re financing, what’s your likely interest rate?
  • How much do you have toward a down payment on that loan?
  • What do you expect your insurance premiums and annual property taxes to be?

It’s okay if you don’t know all the exact numbers at this stage. But be as realistic as possible in answering these questions.

When it comes to determining your budget, the BiggerPockets Mortgage Calculator can help. Enter your numbers and see what your monthly mortgage payment might be. And feel free to experiment. For example, what would a loan look like if you put less money down?

With a buy and hold strategy, your monthly loan payment must be less than you can charge for rent. Knowing what you can spend is a big part of analyzing potential real estate deals.

Analyzing a deal

With a buy and hold strategy, your primary goal is to own a property you can profit from via rent. You don’t want to spend more on a property than it brings in during a typical month.

Yes, appreciation is important—after all, that’s the ultimate benefit of a buy and hold approach. But if you’ve done your homework on choosing a location, your property’s likely to appreciate regardless. Any extra expenses, however, eat into what you’ll make when you sell. You only want a property with strong cash flow so that you can earn a profit during ownership.

As you review a property, think about any work required before you can rent it to tenants. A home inspection or a contractor walking through the property can help determine its maintenance needs. Use the BiggerPockets Rehab Estimator Calculator to get an idea of how much that work may cost. Keep in mind that costs vary from city to city.

When analyzing a buy and hold deal, you’ll have better numbers than you did at the budgeting phase. For example, you’ll likely know the interest rate a lender’s giving you and what your insurance premiums will be. Go back to the Mortgage Calculator and enter these numbers.

What will your monthly mortgage payment be? Can you still make a profit after paying to rehab the property?

That’s how you prepare to acquire a buy and hold rental property. Now let’s go over financing the purchase.

Financing your buy and hold purchase

Few real estate investors, especially when they’re starting, can afford to buy a rental property outright. Most instead finance at least part of their acquisition. Fortunately, there are many financing options for buy and hold rentals.


Many people lack the funds to buy an investment property outright. Instead, they need to finance the purchase by borrowing equity via a mortgage or other type of loan.

Equity refers to the ownership of a property. The more you own of a house, the more equity you have. Let’s say you make a 20% down payment on a home and finance the remaining 80% with a mortgage. At the time you take ownership of the property, you have 20% equity.

You can use equity to help finance another rental property. For instance, let’s say the next property you plan to purchase requires a 20% down payment. You can take the equity in your current property and use it to cover that down payment.

The same approach works with a buy and hold real estate strategy. You can apply the equity you have in one property to help finance the purchase of another. In this way, you’re able to buy another investment property without having to sell your existing real estate.

That’s partly why many investors deploy a mix of buy and hold and fix and flip real estate investment strategies. An investor can own a buy and hold property, for example, and use that property’s equity to help fund buying another one.

After they’ve flipped or sold the second property, the investor can use that money to get another investment property. Maybe they decide to buy another fix and flip or buy and hold property. Or they can use their funds to pursue another real estate investment strategy.

Hard money lenders

A hard money lender is a private individual or company that lends on high-risk loans. They charge high fees and interest on these loans and their loan terms are short, from one to five years. For these reasons, hard money loans are often a better fit for fix-and-flip investments; however, it’s not unheard of to use hard or private money for buy and hold properties.

If you’re interested in a hard money loan, the BiggerPockets Hard Money Lender Directory can help.

Traditional mortgages

You can often get a mortgage to buy an investment property. You may need to make as much as a 20% down payment. But longer loan terms, such as 30 years, make mortgages an ideal financing option for buy and hold investors. (Though some mortgages, such as FHA loans, are challenging to get if the property isn’t your primary residence.)


If you don’t have the cash to buy a property outright, you can partner with another rental investor to come up with the remaining funds.

Flip and hold

This approach is when an investor pursues both buy and hold rental properties and fix and flip homes. For example, you fix and flip your first two real estate investment properties. Then you take the profit you earned from those two deals and get your first buy and hold property.

Creative financing

There are other creative financing options for funding a real estate purchase. Each depends on the circumstances, including the seller’s motivations. For example, a seller may tap their equity to loan you money because they want consistent income from the loans. Or, the seller can transfer their existing mortgage and the property’s deed to you.


Financing your buy and hold investment

How to Finance Buy and Hold Real Estate

Rehabbing before renting

Most buy and hold rental properties need some work for them to be ready for tenants. Rehabbing as quickly as possible allows you to immediately start recouping your investment via rent.

Get ready for your contractor

First, identify what work you need to do. Then, create a list of these items—this is called a “scope of work.” Some things buy and hold investors often address are painting walls and refinishing floors, and some of these issues you may be able to fix yourself. However, you may need to hire a contractor.

Remember, you’re getting the property ready to rent, not to sell. The best updates for buy and hold properties are different than for fix and flip properties. If this were a fix and flip, you might opt to replace the kitchen counter with granite. Since it’s a buy and hold investment, though, the existing countertop is fine.

Set yourself a budget and do what you can to stay within it. The BiggerPockets Rehab Estimator Calculator can help. If you hire a contractor, they’ll provide an estimate for their work.

Tips for hiring a contractor

Want to find a contractor? Here are some tips.

  • Get referrals for contractors from other investors or residential property managers.
  • Ask for written bids and a list of references from at least three contractors.
  • Review each bid. Ask questions and seek more information if a proposal lacks details. Make sure the bids are apples-to-apples comparisons.
  • Remember that the cheapest or highest bids aren’t always the best. Lower bids sometimes come from contractors who aren’t licensed, bonded, and insured, causing you problems if something goes wrong. On the flip side, the most expensive bids may be more than what you need.
  • Note the schedule. During the bidding process, make sure each contractor provides you with a schedule of when they expect to complete the work.

After picking a contractor, you need to manage the rehab. First, make sure the contractor is doing what they agreed to on schedule. As they near completion, review their work. Create a list of anything you want the contractor to address before they’re finished to ensure your rental property is ready for tenants.

Managing your rental properties

When it comes to managing your rental property, you can do it yourself, hire an individual, or outsource it to a property management company.

Hiring someone to manage your properties can be costly. You may need to provide insurance and other benefits—and there are the legal and tax implications of hiring an employee. It doesn’t make sense for most investors to hire a property manager until they own many properties.

Another option is a property management company. These companies market your rental, review and select tenants, collect rent, and deal with maintenance issues. Property management companies cost money, though, and can eat into your rental income.

Do you need a property management company?

Here are some things to consider when deciding whether to hire a property management company.

  • Can you make a profit off your monthly rent after paying a property management company? These charges can affect your cash flow.
  • Do you have time to manage your property? Or is your time better spent on other aspects of your business, such as finding more investment properties?
  • How far away are you from your rental property? If your property’s in a different city or state than you, you may have to hire a property management company.

If you decide to manage your rental property yourself, you’ll be responsible for:

Developing systems for each aspect of landlording is the best approach to managing your rental property. Have a process for marketing your rental and screening tenants. Create a method for collecting rent and communicating with your renter if there’s a maintenance problem. The more organized you are, the more efficient you’ll be.

Understanding the tax benefits

As mentioned before, there’s a tax benefit to the buy and hold strategy. You can deduct many of your rental property costs from your taxes, including:

  • Interest. You can deduct interest accumulating on the loan used to buy or rehab your property. (If you’ve accrued interest on a credit card expense used for your property, you can deduct that, too.)
  • Repairs and maintenance. You can deduct any repair, rehab, or maintenance work.
  • Property taxes. You can deduct the taxes you pay your local government.

There are many tax benefits to owning buy and hold rental properties. If you have questions, it’s always best to seek advice from a certified accountant.

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