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Real investing in property is a great method of building wealth. However it can be daunting for those who are not experienced investors. This article offers strategies for investing in real estate, terms guidelines, tips, and information for novice investors.
There are a variety of real property investment strategies, including the “buy and hold” strategy, which entails purchasing and holding properties for long periods of time to take advantage of appreciation of the property and generate passive income through rental payments. This strategy offers a potential protection against inflation since rents can be adjusted to keep pace with inflation, or even surpass it, and it can also offer diversification from other investments.
Another real property investment strategy, which is referred to as a”core” strategy involves the purchase of fully leased properties with “high-credit” tenants and relying on a minimal amount of leverage. This strategy has a lower level of risk and stable cash flow when compared to other strategies. However, it has lower capital appreciation potential.
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 re-leased and sold for a profit. This is a strategy that is moderate to high risk, but it offers higher returns and the potential for significant gains as opposed to core investments.
Finally, you can invest in REITs. These are companies that manage and purchase income properties. They also have a public trading on major stock exchanges. This strategy gives investors a diverse exposure to real estate and a low correlation to other asset classes, but it does not provide direct control or tax benefits, like owning a property yourself.
