So, if you’d held for another 5 years, the value of your house would have gone up over 70%.

So the first way to combat this reliance on capital growth is holding for the long term.

The second way is to invest in an area that is likely to go up in value over time. We call these undervalued regions.

Problem #2 – You don’t get the money until you sell the property

Another drawback of following a buy-and-hold strategy is you don’t get the money straight away.

Let’s say you’ve owned a property for a few years, and the market has been doing well.

Let’s say your property has increased in value by $50,000.

At this moment, you might feel like you’ve made a ton of money.

But that equity is often locked in the property. It’s not cash you can spend on holidays and clothes.

Yes, the property has increased in value, but it doesn’t mean you can go and spend the money. Of course, you can get there eventually once you sell.

But you’ve got to own the property for several years before you see any significant cash.

Whereas if you were flipping, you will have all those gains in your bank account to spend how you wish.

Some investors see this as a benefit since you’re not tempted to go and spend the wealth you have tied up in your property.

Problem #3 – It’s not an active strategy

The buy-and-hold strategy is like buying a share.

You find a company that you think has long-term prospects, you invest and then hope it goes up in value.

You’ve got to get a tenant, and there’s a few other things to do, but it’s mainly a set-and-forget approach.

This means the investor doesn’t actively increase the value.

But some investors prefer to be hands on; they want to actively increase the value of their property.

This could be through renovation or actively developing a property.

Again, it means you are a more passive investor rather than an active investor.

Problem #4 – It often requires a “top-up”

Often investors who take the buy-and- old strategy are negatively geared.

This means that the property’s rent doesn’t cover all expenses. That means you, as the investor, need to cover the shortfall.

We call this a “top-up”.

If you are borrowing all the money to invest, then your property will likely need a top-up for the first decade or so.

Over time rents will likely increase faster than your expenses, so the top-up should decrease over time.

To overcome this problem, you’ve got to be sure you can afford the top-up.

If you can’t afford to keep the property for 10+ years, then you may be forced to sell early. That could mean you haven’t been in the market long enough and your property may not have increased in value.

Is the buy-and-hold strategy right for me?

Of course, the buy-and-hold strategy has benefits too.

Most Kiwis find it an easier and less risky strategy, at least compared to a more active strategy like BRRRR.

Most importantly, it doesn’t take up as much time. You can use it to build wealth alongside your day job.

If you are a doctor, or factory worker doing 12-hour shifts, it’s a way for you to grow your wealth separate from your income.

So, it’s a great fit for people who have office jobs or busy family lives.

You also don’t need any background or specialist knowledge to be successful. You don’t need to be a qualified builder and you don’t need to know how a hammer works.

But to be successful with this strategy, we recommend holding on to your investment for 15-20 years.

That can be tough, especially as things change.

To be successful with this strategy it’s important to have realistic expectations.

This means knowing what the risks are and mitigating them.