A Real estate investment strategy is defined as a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio. The strategy will be designed based on the investor's risk-return tradeoff. some investors will prefer to maximize risk expected returns by investing in risky assets, others will prefer to minimize risk, but most will select a strategy somewhere in between.
Passive strategies are often used to minimize transaction costs and market timing .One of the better-known investment strategies is buy and hold. Buy and hold is a long term investment strategy that give a good rate of return .
The investment strategy can be divided into following categories.They are
- Bargain purchase You have to purchase the property for at least 20% below current value in the real estate market.
- Increase value you must buy a property for the current market value.You have to select the properties which have some potential.After purchase do some modifications in order to increase the market value at least 20% within six months
- double-digit cap rate. you have to buy the building on terms of capitalization rate at least 10% or more. The capitalization rate is the net operating income divided by the purchase price. If their is no bargain purchase, then double-digit cap rates are very hard to find. They generally only occur in depressed markets or in small market .
- discount price Focus on buying properties which can easily be put on rent.Look for a property that is available at a discounted price.
- Invest real estate funds If you are not an expert of real estate then invest in real estate funds.
No comments:
Post a Comment