With Seattle and the surrounding area now one of the hottest real estate markets in the United States, more people are investing in buy and hold real estate. Buy and hold is an investment strategy where a purchased investment property will be held on to for an extended period of time. While the property may be sold down the line, it will usually be rented out for income. It is important to have a plan going into buying an investment property and we provide a calculator proforma to help you calculate the potential income and expenses when advising you on buying a buy and hold property.
When looking for an investment property to buy and hold for rental purposes, it is essential to find the right deal. You want to keep the potential cash flow in mind when searching as it is dependent on the expenses of the property which is based on purchase price. Additionally, at the start of your search, you want to keep in mind what areas have demand for tenants. This might mean focusing on neighborhoods or cities that are on the rise, even if it means paying a somewhat higher price for your investment property.
Buy and hold properties have the same methods of funding as flip properties, such as hard money, just structured a little differently. After purchasing the property there is a minimum waiting period before you can refinance for the new appraised amount, and this can vary based on the lender and program type. Heaton Dainard Real Estate can help you connect with our preferred hard money lender, Intrust Funding.
Once you have the property, you will need to add some value. While there isn’t as much need to give the property a full fix up, there is still some need to do some work and make the property appealing to live in. At the minimum, the walls should be painted, update the flooring, and give a small facelift to the kitchen and bathroom. These expenses should be factored into your budget before making an offer on the property. Some upgrades can increase your rental amount by 25-30 percent. Check out our blog for some ideas on how to increase value.
When the property is fixed up and ready to be rented, you have several options for managing the rental. You can manage it yourself or work with a property manager. If managing the unit yourself, you will need to make sure you have a system in place before buying, as you will need to put in a good amount of time and effort to keep the property running and in working order. A property manager can mitigate some of the time spent on the details of the rental property so that you can handle the overall management.