Valuation & InvestmentBuy and Hold
Synonyms: Long-Term Holding، Hold Strategy، Long-Term Rental Investment
Last updated: 2026-09-25
Short Definition
Buy and hold is a long-term real estate investment strategy in which a property is bought and kept for many years to earn steady rental income and benefit from gradual appreciation, while minimising repeated purchase and sale costs.
Overview
Buy and hold is a long-term real estate investment strategy in which a property is bought and kept for many years to earn steady rental income and benefit from gradual appreciation, while minimising repeated purchase and sale costs.
It suits the Saudi market for several reasons: the 5% Real Estate Transaction Tax is paid on transfer rather than annually, so it is spread over the holding period; leases documented on the Ejar platform renew automatically unless a non-renewal notice is sent at least 60 days before expiry, and a rent-adjustment request must be made at least 90 days before expiry; and a documented unified residential lease is an executive instrument that eases recovery of arrears through the Execution Court. It is, however, affected by recent restrictions, notably the five-year freeze on annual increases in residential and commercial rents in Riyadh from 25 September 2025, which makes returns in Riyadh depend more on current rent and on asset appreciation.
To succeed, investors need a location with sustainable rental demand, financing whose instalments are covered by net rent, regular maintenance and a vacancy reserve, licensed property management or disciplined self-management, and attention to regulatory changes such as vacant property fees and the new Execution Law (Royal Decree M/237 of 3/11/1447H), expected to take effect around late October 2026. Holding does not remove risk: building obsolescence and shifting neighbourhood preferences can erode real value over time.
⚖️ Legal Basis
Several laws govern the strategy: unified leases documented on the Ejar platform under REGA supervision (documentation fees of SAR 125 per contract year for residential leases, and SAR 200 for the first year and SAR 400 for each additional year for commercial leases); the lease provisions of the Civil Transactions Law (Royal Decree M/191 of 29/11/1444H); the Real Estate Transaction Tax Law (Royal Decree M/84 of 19/3/1446H) on sale; the five-year freeze on annual rent increases in Riyadh from 25 September 2025; and the White Land and Vacant Property Fees Law as amended by Royal Decree M/244 of 7/11/1446H, which allows an annual fee on vacant property of up to 5% of its value, which the Council of Ministers may raise to 10%.
💡 Practical Example
In 2026 Reem bought a six-apartment building in Al-Naseem, Riyadh, for SAR 4,200,000 with 60% financing. Rent is SAR 42,000 per apartment a year (SAR 252,000 in total); after 5% vacancy and expenses of 12% of effective income, net income is about SAR 210,672 a year, roughly 5% on the price. Because Riyadh rents are frozen until September 2030, she bases her plan on current income with no increases. If the building appreciates 3% a year for ten years it will reach about SAR 5,645,000, and on sale the 5% transaction tax (about SAR 282,000) arises only once rather than with every deal.
⚠️ Common Mistakes
- ✗Neglecting routine maintenance because of the long horizon, which accelerates obsolescence and lowers value and rent.
- ✗Planning on annual rent increases in Riyadh despite the five-year freeze from 25 September 2025.
- ✗Not documenting leases on Ejar, losing executive-instrument status and prolonging arrears recovery.
- ✗Missing notice deadlines: non-renewal at least 60 days and rent-adjustment requests at least 90 days before the lease ends.
- ✗Ignoring inflation and opportunity cost when calculating the real return.
🌍 International Differences
The strategy is common worldwide, but its viability depends on recurring taxes: Turkey levies an annual property tax (emlak vergisi), the UK taxes rental income, and Egypt levies an annual real estate tax on buildings. Saudi Arabia has no general annual tax on property ownership, but it charges fees on white land and vacant property in designated areas, and rental growth in Riyadh is currently limited by the freeze.
FAQs
What is the advantage of buy and hold in Saudi Arabia?▾
The 5% Real Estate Transaction Tax is paid only on transfer, so it is spread over the holding years, while the owner earns regular rental income documented on Ejar and may benefit from appreciation.
Can rent be raised during the holding period?▾
Outside Riyadh a rent adjustment can be requested at least 90 days before the lease expires under its terms; in Riyadh annual increases are frozen for five years from 25 September 2025 for residential and commercial property.
How can I protect myself against tenant default?▾
Document the lease on Ejar: a documented unified residential lease is an executive instrument enforced at the Execution Court; note that the new Execution Law (M/237) is expected to take effect around late October 2026.
Is buy and hold risk-free?▾
No. It carries vacancy, building obsolescence, changing neighbourhood demand, rising financing costs and regulatory risk, but it is less exposed to short-term market swings than flipping.
Are fees charged on vacant property?▾
Annual fees may apply to vacant properties in covered areas under the White Land and Vacant Property Fees Law as amended by Royal Decree M/244, up to 5% of the property's value and possibly raised to 10%.
