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Why buy-and-hold investors go broke (and how to avoid it)
Casey Franchini and I expose the hidden risks that can sink your buy-and-hold strategy.
Michael Zuber
December 05, 2025
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The 7 reasons why buy-and-hold investors go broke
Everyone loves to talk about how real estate creates millionaires. And it’s true—buy and hold has built more wealth than almost any other strategy. But what doesn’t get talked about enough are the failures.
Long-term rentals can and do go wrong, especially when new investors get distracted by the glossy success stories on social media and forget the fundamentals.
That’s why Casey Franchini and I discussed the seven biggest reasons why buy-and-hold investors lose it all:
1. Wrong mindset: chasing quick cash flow
Too many new investors think rentals will make them rich overnight. They chase high advertised cash flow in low-quality neighborhoods with no appreciation. Over time, rising costs (insurance, maintenance, inflation) outpace stagnant rents. What looked like a “cash cow” turns into an alligator that eats you alive every month.
2. Bad debt structures
The biggest wealth destroyer in real estate is the wrong loan. Adjustable rates, short-term bridge debt, balloon payments—these all work until they don’t. When rates rise or refis dry up, your payment balloons and your cash flow collapses. The survivors? Those who lock in 30-year fixed debt and never gamble their portfolio on cheap short-term financing.
3. Ignoring the true cost of ownership
A mortgage isn’t your only expense. Roofs wear out. HVAC systems die. Main drain lines fail in catastrophic ways. Insurance won’t cover everything. If you only underwrite principal, interest, taxes, insurance, and a vacancy line, you’re missing the silent killers that pile up over decades. The real cost of ownership is always higher than new investors think.
4. No reserves
Turnover is the landlord’s silent assassin. Even one vacancy or tenant turnover can wipe out a year of “cash flow” if you don’t have reserves. If you’re spending every dollar of profit instead of saving for the inevitable, you’ll quickly become a motivated seller—at the worst possible time.
5. Skipping tenant screening
Your most important team member isn’t your CPA or your agent. It’s your tenant. A bad tenant will wreck your property, skip rent, and hide problems until they become five-figure repairs. Proper tenant screening protects your asset. A vacant unit is better than a nightmare tenant every single time.
6. Being in a rush
Impatience kills. New landlords often panic when a unit sits empty and rush to accept the first applicant with a pulse. That’s how you inherit professional non-payers and problem tenants. Lower the rent if needed, offer a move-in special, but never cut corners on tenant quality. Tenant retention—not deal bragging—is the real flex.
7. Poor property management
Whether you self-manage or hire a company, sloppy management is a fast track to the poorhouse. Shady property managers nickel-and-dime owners, ignore tenant requests, and cause avoidable turnover. Every unnecessary vacancy costs you thousands. Great management and tenant care protect your bottom line more than any spreadsheet projection ever will.
The big picture
Buy and hold works. But only if you treat it like a long-term business, not a lottery ticket. Mindset, financing, reserves, tenants, and management—get those right and rentals can build generational wealth. Ignore them, and you’ll become another investor who “tried real estate once” and swears it doesn’t work.
ResiClub chart of the week:
Last month, ResiClub's Lance Lambert looked at the conflicting data on the age of the first-time homebuyer—digging into why NAR’s headline-grabbing spike to age 40 doesn’t line up with Federal Reserve and Census figures, and what generational homeownership trends actually show about when Americans are really buying their first homes.
Lance reported that while NAR’s survey now pegs the median first-time buyer age at 40, other benchmarks—like the New York Fed’s credit-panel data and Census figures—show a much gentler climb, with today’s typical first-timer closer to their mid-30s. He found that most of the discrepancy boils down to how each dataset is built: survey vs. credit records, whether cash buyers are included, and how “first-time buyer” is defined.
Rather than a sudden post-pandemic cliff in affordability alone, the data points to a longer-running pattern of delayed adulthood milestones—more schooling, later marriage, more years living with parents—that’s gradually pushing homeownership further out on the life calendar.
The big picture?
“I’m going to take this particular first-time homebuyer data—especially the NAR series—with a grain of salt going forward,” Lance wrote. “Instead, I’ll lean more on generational homeownership rates by age—and when you look at those figures, they clearly confirm that younger generations are entering homeownership more slowly than their older peers.”
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