Buying and holding can be a very effective means of generating income through an investment. A buy and hold investment is a real estate term that refers to the practice of purchasing a property and then holding that property while renting it out. This has many advantages over other real estate investing methods like flipping, in which a lot of money is lost to taxes and other costs. Holding real estate has three profit potentials:

1. As long as holding the property doesn't cost you more than monthly rent payment from the tenant, you earn money each month.

2. If your mortgage includes a principle component, which would mean that the tenant is paying off the mortgage on the property for you and helping you to build equity. 

3. Real estate can become more valuable over time, which means that even as you earn money in the short term through rent payments, you also earn money in the long term through increased property value.

The first thing to do if you want to use the buy and hold investment strategy is to find a good deal on some property. You'll want to look for property you can buy below its market value to start out with a net gain in equity. However, the bulk of your profit from buying and holding is going to be from rent paid by tenants. If you try to plan on making your money from increasing market value of the property, you stand to lose money if the market shifts in a way you didn't anticipate. Rent from a tenant is a solid, reliable source of income that won't be affected nearly as much by a sudden shift in property value. 

Property management may sound like an unpleasant job, but it can actually be one of the most rewarding and lucrative careers in the country. Being a land lord pays you huge dividends on your time with low risk and very little work for the way. It can be a challenge to manage property properly if you don't have a system in place, but as long as you plan it out, have realistic expectations for costs and expenses, and manage the property well, you stand to earn a lot of money.

Read on for the next topic: the pros and cons of hiring a professional property management firm.