Real investment in real estate is a fantastic way to build wealth. However it can be overwhelming for investors who are new to the field. This article offers strategies for investing in real estate and terms, tips, and advice for beginners.
There are many real estate investment strategies, including the “buy and hold” strategy, which involves purchasing and holding property for prolonged periods of time to profit from appreciation in property and generate passive income through rental payments. This strategy can be an opportunity to hedge against inflation since rents can be adjusted to keep up with inflation or even exceed it. It can also diversify your investments.
A core strategy is a real estate investment strategy that involves buying fully leased properties and employing the least amount of leverage. This strategy has lower risk and an increased stability of cash flow than other strategies, but it also has less opportunity for capital appreciation.
Value-add investments involve purchasing and renovating properties that are below market value, typically those with management/operational issues, capital constraints, or physical problems. These properties are then released and sold at a profit. This strategy is medium to high risk, but offers higher returns than core investments and a potential for significant gains.
Additionally, there is an option of investing in REITs (real estate investment trusts) which are businesses which purchase and manage income properties and trade on major stock exchanges. This strategy provides a broad real estate exposure, and has a low correlation to other asset classes. However it doesn’t offer any tax advantages or direct control such as owning a property.