Owner Advice · Long-Term Real Estate Investing

Why Real Estate Often Rewards the Owner Who Can Hold On

Why patience, realistic expectations, and a longer view can matter more than one difficult season.

Real estate is usually presented as a pretty straightforward investment.

You buy a property, collect rent, pay down the mortgage, and hopefully watch the value increase over time.

Sometimes it works almost exactly that way.

Other times, the property goes through a period when rents are not moving, expenses are increasing, and the value is not growing the way the owner expected. That is usually when people start asking whether they should sell.

Sometimes selling is the right decision. An owner may need access to the money, their retirement plans may have changed, or they may have a better place to invest the equity.

But sometimes the property is not really the problem.

The owner may simply be judging a long-term investment during a frustrating part of the market.

Real Estate Can Feel Like Choppy Water

I think of long-term real estate investing a little like being out on the ocean.

There are times when the water is calm.

The property stays occupied. Rents are strong. Repairs are manageable. Values are increasing, and everything seems to be working exactly as planned.

Then the water gets rough.

A tenant moves out. The air conditioner has to be replaced. Insurance goes up. Property taxes increase. New rental inventory enters the market, and renters suddenly have more choices.

When several of those things happen close together, an owner can start questioning the entire investment.

But rough water does not always mean the boat is sinking.

Sometimes it simply means the owner has reached the part of the investment where patience matters.

The market may need time to absorb new inventory. Rents may need time to catch up. The mortgage balance continues to come down, and the property continues building equity as long as the owner keeps it maintained and rented.

That does not make the frustrating years easy. It does mean they should be viewed as part of a much longer investment.

What Happened in the Lubbock Rental Market

The softening we have seen in Lubbock was not limited to duplexes.

Around 2021 and 2022, a large amount of rental inventory came into the market. That included build-to-rent duplexes, but it also included a significant number of single-family homes.

When a lot of similar rental properties become available within a relatively short period, renters have more choices.

Owners begin competing more heavily for tenants. Properties may take longer to lease, and rents cannot always continue increasing at the pace they had been.

In some cases, rents came down. In others, they simply stopped growing as quickly.

That can be especially frustrating for owners who bought during the post-COVID housing market.

During that period, some single-family homes were appreciating at rates of 20% to 22% per year. That was never a normal housing market.

Those kinds of increases were not likely to continue year after year. Even a very strong long-term housing market typically grows at a much more moderate pace.

Many investors bought properties when prices were moving quickly. Four or five years later, the market may only now be catching up to the price they paid.

That does not necessarily mean property values are collapsing.

In many cases, values have simply plateaued, especially among some higher-priced homes.

We are seeing a few owners sell near the same price they paid four or five years ago. Some may sell slightly below their original purchase price. Others are able to sell close to even.

That can feel like a disappointing result after several years of ownership, especially when the owner expected the property to continue appreciating at the same pace they saw during 2021 and 2022.

But the market did not necessarily fall apart.

It simply stopped moving at an unusually fast rate.

Rents Did Not Keep Up With Home Prices

The bigger challenge is that rents did not rise at the same pace as home prices.

An investor may have paid considerably more for a property because values were increasing quickly. But the amount renters were willing to pay did not continue increasing at that same rate.

At the same time, operating expenses kept moving in the other direction.

Insurance became more expensive. Property taxes increased. Labor and materials became more costly. Repairs that once seemed routine started carrying a much larger price tag.

That leaves owners in a frustrating position.

The property may still be occupied. It may still be paying down debt. It may still be a perfectly reasonable long-term investment.

But the monthly cash flow may not look much better than it did a few years ago.

In some cases, it may look worse.

That does not automatically mean the property was a bad purchase. It may mean the owner bought during a period of unusually rapid growth and now has to give the investment more time to settle into a normal market.

But when do you make that decision to sell?

Sometimes the Reason for Selling Has Nothing to Do With the Property

We currently manage a group of properties that a husband and wife purchased years ago through a self-directed IRA.

They had reached retirement and were beginning to think about how they would eventually exit the investment.

Unfortunately, the husband passed away last year.

Before his passing, he had already started thinking seriously about liquidating the properties. Part of that was financial. He wanted them to have easier access to the money during retirement.

But part of it was also personal.

He did not want his wife to be left with a portfolio of rental properties that she would have to manage, make decisions about, or eventually sell on her own.

That is a completely reasonable reason to consider selling.

Would the properties probably be worth more if they were held longer? Most likely.

But getting the absolute highest possible value is not always the only goal. At some point, simplicity, liquidity, estate planning, and family needs may become more important.

In that situation, selling is not necessarily a judgment that the properties were bad investments. It is recognition that the owners’ needs changed.

That is very different from selling simply because the property has had a disappointing few years.

Single-Family Homes and Duplexes Do Not Exit the Same Way

Single-family homes and duplexes have both been affected by the increase in rental inventory, but they behave differently when an owner is ready to sell.

A single-family home usually has a larger group of potential buyers.

It can be purchased by another investor, but it can also be purchased by an owner-occupant who wants to live in the property.

That generally makes a single-family home easier to liquidate.

A duplex is more complicated.

Most duplex buyers are looking at the property primarily as an investment. They are paying close attention to the rent, operating expenses, interest rates, and expected return.

When those numbers become less attractive, the buyer pool can become cautious very quickly.

That is what makes the Lubbock duplex market especially difficult to time.

Duplexes can become popular quickly. Developers build more of them, investor demand increases, and prices rise.

Then the market can soften just as quickly when too much inventory becomes available or financing becomes more expensive.

That does not make duplexes bad investments.

It does mean the owner needs to be prepared to hold them longer.

For a Lubbock duplex, I believe an owner should plan on a holding period of at least 10 years.

That does not mean the owner can never sell sooner. It means the investment should not depend on a five-year exit for the numbers to work.

A five-year timeline may put the owner in the unfortunate position of needing to sell during the exact part of the cycle when duplex demand is soft.

Cash Flow Is Important, but It Is Not the Whole Return

Owners naturally pay attention to the amount of money that reaches their bank account each month.

They should.

A rental property needs to generate enough income to cover expenses, and every owner should maintain reserves for repairs and vacancies.

But monthly cash flow is only one part of the return.

The tenant may be helping pay down the mortgage every month. The owner may receive tax benefits, depending on their individual situation. The property may appreciate over time. Improvements made today may protect its condition and support stronger rent later.

A property can have average cash flow today and still become a very good long-term investment.

This is especially true when the owner is building equity and holding through a softer market.

A one-year income statement does not always tell you whether a 10-year or 20-year investment has been successful.

Keeping a Good Tenant Can Be More Valuable Than Raising the Rent

On some of the properties purchased during 2021 and 2022, we have not been overly aggressive with rental increases.

That may sound strange when an owner is already disappointed with cash flow.

But there is a reason for it.

A good tenant who stays for two or three years can be more valuable than a slightly higher rent that creates frequent turnover.

Every turnover comes with a cost.

There may be vacancy, cleaning, repairs, make-ready expenses, leasing costs, and lost rent while the property is empty.

An owner may gain an extra $50 or $75 per month by pushing rent, but lose several thousand dollars when the tenant moves out.

The highest possible rent does not always produce the best return.

Sometimes the smarter decision is to keep a good tenant, maintain a reasonable rental rate, and avoid unnecessary turnover.

That decision may not look exciting on a monthly statement, but it can help the property perform much better over time.

Selling Can Still Be the Right Decision

Holding is not always the answer.

An owner may need cash. They may be retiring. Their family may not want to inherit rental property. They may have another investment opportunity that better fits their goals.

The property may also require more money or attention than the owner is willing to give it.

Those are all legitimate reasons to sell.

The important thing is understanding why the owner is selling.

Selling because the money has a better use is different from selling because the last few years have been frustrating.

Before making that decision, I think an owner should ask a few honest questions.

• Is this property truly a poor investment, or is it simply going through a difficult part of the market?
• Would selling today mean accepting a price that is close to what was paid several years ago because the market has not had enough time to catch up?
• Does the owner actually need access to the money, or are they reacting to slower rent growth and higher expenses?
• Is there a better investment available for the equity?
• What might the property look like if it were held for another five or 10 years?

Those questions will not always lead to the decision to hold. But they can help an owner make a thoughtful decision rather than reacting to a frustrating year.

The Answer Many Owners Do Not Want to Hear

For someone who bought in 2021 or 2022 and is disappointed with the property’s cash flow today, the honest answer may be simple.

Hold on. To quote Warren Buffett, “Our favorite holding period is forever.”

Take care of the property. Keep good tenants when possible. Maintain reserves. Do not ignore repairs. Price the home according to the rental market that exists today, not the market that existed when it was purchased.

Lubbock still has rental inventory that needs to be absorbed.

Rents may take time to improve. Property values may take time to move beyond the prices paid during the post-COVID market.

That may not happen next month or even next year.

But real estate was never meant to be judged by one difficult leasing season or a few years of slower appreciation.

The long-term return often comes from being able to stay steady during the years when the investment is not especially exciting.

A long-term hold does not mean refusing to sell under any circumstances.

It means understanding what you bought, being honest about the market, and giving the property enough time to do what you originally bought it to do.