Real estate is a tricky market to enter, as there are many factors to consider when buying a home or property. There are dozens of ways that you can use real estate, but the two most common practices are buy-and-hold and buy-and-sell. Buy-and-hold is one of the oldest and most reliable forms of real estate investment, but buy-and-sell has recently gained new momentum due to the current real estate market and the emergence of reality T.V shows that focus on flipping homes. So which form of investment is the best, and which tactic should you employ if you’re entering the real estate market? Here are some pros and cons of both of the major forms of real estate investment.
One of the biggest differences between the two forms of investment is the time that each process takes. Using the buy-and-sell method can be extremely quick and may only take a few months to complete. This is a major pro as you can earn thousands of dollars in the span of a few short months by flipping houses. On the other hand, if you use the buy-and-hold method then you are going to need to dedicate a lot more time to your real estate property. Typically, real estate investors practicing the buy-and-hold method will hold onto their real estate for several years, waiting for the market to favor them. This can be seen as a major con as your return on investment will likely come in at a much slower rate than if you were using the buy-and-sell method.
One of the major pros about using the buy-and-hold method is the potential to accumulate a great amount of wealth. Real estate has the potential to appreciate, so holding onto a property can be a big boon to your wallet. For example, if you purchase Houston real estate for $100,000,000, with some further investments and patience the property could appreciate to a much higher value. However, this is typically not possible if practicing the buy-and-sell method. Since you are selling the real estate so fast, it has little time to appreciate. Although you may be receiving your money much faster by practicing the buy-and-sell technique, you also may be missing out on a lot of money since you are not letting the real estate fully appreciate. This can be seen as a major con of the buy-and-sell method.
One of the major pros about the buy-and-sell method is that it is relatively free of risks. Real estate markets fluctuate over time, but are relatively stable in the short term. Since you hold real estate for such a short period of time when flipping real estate, you are highly unlikely to encounter any sort of market crash. In contrast, the buy-and-hold method can be very risky. Since you are likely to hold onto your real estate for extended periods of time, you are much more susceptible to market failures. Market crashes like the 2008 housing crisis can cut deep into your profits and decimate your bottom line. That being said, with some market research and a little bit of luck you can avoid these potentially disastrous failures and turn a large profit.