Real estate investing can be a profitable and exciting way to increase your wealth. However it can be daunting for new investors. This article provides real estate investing strategies and terms, tips, and advice for newbies.
There are many real estate investment strategies, such as the ”buy and hold” strategy, which involves buying and holding properties for long periods of time to profit from appreciation in property and generate passive income from rental payments. This strategy could be a hedge against inflation because rents can be adjusted to keep up with or outpace inflation, and may also provide diversification from other investments.
Another real property investment strategy, which is referred to as a fundamental strategy involves the purchase of fully-leased properties with ”high-credit” tenants and relying on only a small amount of leverage. This strategy is less risky and more stable cash flow than other strategies, however it also typically offers the least chance of 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 sold at a profit. This strategy is moderate to high-risk but has higher returns and the possibility of gaining significant gains than traditional investments.
Additionally, there is an option to invest in REITs (real estate investment trusts), which are companies that purchase and manage income properties. They also publicly trade on major stock exchanges. This strategy provides a diversified exposure to real estate and low correlation to other asset classes, but it does not allow direct control or tax benefits similar to owning a property yourself.