Buy-and-Hold Portfolio Trends 2023 Strategy for Real Estate

Experienced investors know that a diverse portfolio is more likely to survive turbulent economic conditions, produce reliable growth, and safeguard their contributions. That’s why so many turn to real estate and, more specifically, buy-and-hold properties to flesh out their investments: you can’t get much safer than investing in something consumers need to live, and holding these properties long term invites an additional revenue stream in the form of rental income.

If you’re new to buy-and-hold real estate investment, read this blog to better understand the perks and potential pitfalls of this investment strategy.

For those of you curious about how successful buy-and-hold investors who moonlight as landlords structure their portfolios (and the outcomes they saw last year as a result), let’s review data from TurboTenant’s State of the Rental Industry Report 2022. The all-in-one landlord software analyzed over 11,000 survey responses from landlords and tenants between their two-part report, and their findings can help you take your business to the next level in 2023.

Buy-and-Hold Portfolio Trends Inform 2023 Strategy

When asked to select all the types of real estate investments currently stocked in their portfolios, single-family residences (including condos/townhouses) were the most popular by far. 62.4% of respondents had at least one SFR in their portfolio.

What Types of Real Estate Investments Did Landlords Own in 2022?

• Single-family (including condos/townhouses): 62.4%
• Small multifamily (2-4 units): 25%
• Commercial multifamily (5+ units): 6.5%
• Other commercial/industrial investments: 2.6%
• Mobile home/RV parks: 1.9%
• REITs or fund investments: 1.1%
• Self storage: 0.5% 

Despite the popularity of single-family property, 2022 saw significant buzz regarding the climb of multifamily rent prices. The end of the year saw those prices dip, but keep your eye on multifamily properties in your area. There’s reason to believe that 2023 will see an uptick in this type of property acquisition, particularly for buy-and-hold investors looking to save on housing costs by occupying a unit in their multifamily building.

Should You Buy Property in 2023?

Predicting the best time to buy real estate is tricky business; with mortgage rates in flux and a potential recession on the horizon, you’re likely asking yourself two questions:

1. Should I buy property this year?
2. Will I be missing out on new opportunities if I hold off?

Looking at historic data can help inform your decision. If buy-and-hold landlords follow the precedent set last year, we predict more single-family and multifamily properties will be snapped up nationwide, even if there’s initial hesitation from investors.

In February 2022, only 30.7% of landlords planned to purchase property that year – yet 42.6% reported they had purchased one or more properties in that time frame. Should you expect to see something similar this year?

As of December 2022, 50.2% of landlords said they plan to purchase property in 2023. However, current mortgage rates may put off even the most ambitious of investors unless housing prices drop; all the more reason to keep your finger on the pulse of your local market.

“If housing prices flatten or decline, I anticipate independent landlords will be quick to start growing their portfolios again. In the current climate with rising interest rates, they gain an advantage since independent landlords aren’t confined to financing with conventional mortgages. Additionally, recessions typically put upward pressure on the rental market, which we expect to see,” said Seamus Nally, CEO of TurboTenant, in a press release.

All of this said, 2023 might not be a bad time to purchase more buy-and-hold real estate – but be careful not to get burnt by an ill-fated flip. It’s best to buy property this year if:

• You’re not going to be reliant on cash flow from the property immediately
• You’re looking at your next purchase as a long-term investment
• You don’t have too much hard debt, such as high-interest credit card debt

Play the long game, and you’ll come out ahead no matter how the economy shakes out in the short term. That’s what most buy-and-hold landlords plan to do (and to great success).

38% of landlords’ annual household income was $150,000+ last year, nearly double 2021’s median household income.

Perhaps that’s why 45.7% of landlords’ long-term portfolio plan is to simply rent out units until they want to stop. Another 18.7% are focusing on diversifying their portfolios, so expect a fairly competitive market this year despite high home prices and mortgage rates.

Looking to learn more about last year’s trends to help you forecast future success? Check out TurboTenant’s full State of the Industry Report 2022 today!