Midterm Keeper Plans in Profitable Real Estate Investing

Midterm keepers in real estate investments are generally properties used to gain profits over significant time periods.

The shortest period of time that you can usually hold a midterm keeper to reap reasonable profits is three years. Normally, holding buildings longer produces more profits, but you can make good money with investments of short duration. For example, you might buy and restructure an apartment building during your first year of ownership. This might include replacing some tenants, raising rents, reducing operating costs, adding amenities such as additional parking or coin operated laundries to increase income, and so forth. The second year of ownership should establish a pattern for the profitable changes. By the end of the third year, the building's income may be increased enough to show a good profit as either a building you keep or a building you sell for adequate profit.

It's difficult to buy a piece of property, hold it for only three years, and turn a decent profit, but it can be done. Buying into a cold market that turns hot is one way to make short term investment pay off nicely. Another way is to buy a building and make improvements, either physical or in cash flow. For example, apartment buildings often are valued by the numbers they generate. Appreciation is still a factor, but strong cash flow can increase a building's value quickly, and this is something you might be able to change in a short time. So if you bought a 12 unit apartment building at a low price and revamped it to include new tenants, higher rents, and lower expenses, you could conceivably make some money within three years. Physical improvements also could make a property more valuable in a short time.

All in all, generally you want to stay away from three years plans. If you want short term deals, go for quick flips. The chances of making money are much better when you hold keepers for more than three years.

A five year deal usually is more viable than a three year plan; nevertheless, five years still is not a lot of time to build wealth in an average building.

Keeping a building for seven years gives appreciation time to work in normal economic markets. It is, however, also a long enough period of time that significant changes can occur in a property's location. This can be good or bad, depending on the changes. An ownership of seven years also is long enough to expect the possibility of some major repairs, such as replacement of a furnace or roof. When you choose a building with an eye towards keeping it, a seven year plan usually works well, but you must make sure that the building is suitable for such a long ownership.