Tuesday, February 1, 2011

Buy and Hold Real Estate Strategy

I am not a fan of buy and hold (or buy-and-hold) investment strategies of any kind.  They are unremarkably average in every way being the most passive approach one can take towards equity purchases in either the stock market or in real estate.

But this blog site offers some excellent advice on the approach.  I want to thank Dave of Portland for sending it to me.

I think the advice the author's give in their "Three Rules" near the end of the article is so important to remember, and to be blunt, many real estate investors don't.

But even for those investors remembering the rules, the fundamental weakness of buy-and-hold investing is the necessity to PREDICT the future in order to sell at a profit.  Look at the author's three rules.  They all involve making current guesses about future costs and market conditions.  Very hard to do, even 50% of the time.

Contrast this with a more moderate cycle trader in the real estate market, buying with a short 12-24 month window from open to close.  This means far fewer unknown factors about the future since the deal has a short fuse.

Buying long means knowing long.  Knowing short in the market is often too difficult enough.  Plus betting on market price appreciation over the long term as an investment strategy assumes there will be some in the long run, a bold assumption at that.