The Buy, Rent & Hold Strategy of Real Estate Investing
Before I get into the list, I want to establish upfront that you should generally approach real estate investing with a “buy, rent & hold” strategy: buy it, then rent it out, and hold onto it as an investment. That's not to say that you have to hold onto it forever, but “betting on excessive appreciation” is not a long-term strategy.
Real estate is one potential piece of your asset allocation pie, so you should think about, and compare, its potential results against the same benchmark the finance industry compares its results: the 7-10% CAGR (compound annual growth rate)— which I discuss in my Big Picture of Investing post.
What You Need to Know About the Compound Annual Growth Rate
Cash flow can be positive or negative and is basically the monthly financial net result of your property's general income (rent received) and expenses.