Any investor who is looking to expand their portfolio should understand at least some basic real estate investment strategies. Investing in real estate is really an umbrella term by putting your money into the property market â there are many different ways in which to do it. I'll address the basic strategies of buying and holding, flipping, and options â but remember that you should carefully consider your goals before you decide which strategy will work best for you.
Buying and holding
This is the real estate investment strategy that all of us are likely to be familiar with and involves â you guessed it â buying a property and holding onto it. This can be beneficial because you'll be earning a stream of rental income from the people who occupy your home, as well as taking advantage of the capital growth which will occur over time. Buying and holding is a satisfying experience, beause the traditional bricks and mortar investment is something tangible you can see and touch â and it's nice to drive past a property and be able to point and say 'that's mine'. Nice feeling!
This real estate investment strategy is all about buying a property, and selling it on pretty soon afterwards. The key is finding a property which has value at a reasonable price. The value may lie in the great price at which you acquired it to start with, or it may lie in the improvements you can make to the property through basic touch ups and other things. The point with flipping is your ability to be able to sell the property at a higher price than that which you bought it for.
No good real estate investment strategy is complete without a basic understanding of the concept of options. Real estate options are a similar concept to stock options, in that you pay a sum of money in return for control over an asset for a period of time. For example if you purchase an option over a block of land for a specific sum of money for 3 years (just for the purposes of example â the lifetime of real estate options may vary greatly) â you have the right to find a buyer for that property. The best thing about real estate options is that you lock in a purchase price when you buy the option â and it's up to you to find a buyer for a better price than that. Once expenses are taken care of, you get to pocket the difference â it's how some great fortunes have been made in real estate.
There are many real estate investment strategies that you can use to build your wealth â learn a little about them, then specialize in one or two â the more you know the better you'll be. The next step is then to put your knowledge into practice and get started on your real estate investment journey! Enjoy!