The buy and hold strategy
For most Australians who are looking to build wealth through property, one of the most popular strategies is the ‘buy and hold’. While there are other strategies that include buying and selling over short periods of time, or property development which can generate greater returns, buy and hold offers less risk and time spent strategising when building wealth. Unless you plan to give up your day job and invest a lot of time in property investment, buy and hold can work very well over time.
The purpose behind the buy and hold strategy includes the following:
- Buy as many properties as necessary to achieve financial goals
- Only sell properties if it is required to achieve financial goals or the property is no longer performing
As this strategy relies on the equity and income that is accumulating and growing over time, it is essential to maximise your results by following a number of rules that work towards ensuring you can buy as many properties possible. The total value of your portfolio, types of property and the power of time will determine how quickly you can achieve your goals.
Rules to building a substantial portfolio:
- Be clear on your financial goals and time-lines
- Maximise your leveraging capability
- Understand how borrowing capacities are calculated
- Ensure you maintain your buffers
- Invest when you can next afford to (nothing to do with timing of the market)
How do the majority of property investors invest?
I’ve had the pleasure of observing this process over the past 10 years as a buyers advocate, and it amazes me to see that most people will spend more time on planning a holiday than they do with planning one of the most successful strategies to achieve financial freedom.