The real estate market helps in the diversification of an investment portfolio. A real estate investment helps investors beat inflation since it has a low correlation with the stock market. Compared to most market-linked securities, real estate investments are less volatile. Property owners can reap several tax benefits on their real estate investment to enhance their returns.
Real estate investors can also expand their portfolios by venturing into geographically diverse locations. Such an approach makes them more flexible to withstand various kinds of economic storms.
Real estate assets are of different kinds – commercial real estate, real estate wholesaling, single-family rental property, real estate debt, apartment buildings, and others. Likewise, there are several kinds of real estate investing.
Experts have listed tactics for every real estate investor, keeping the current market in mind. The real estate strategy apt for an individual investor is dependent on factors like:
- risk appetite
- degree of control desired over the asset
- amount of cash available for a down payment
- level of cash flow desired, and
- level of expertise as a real estate investor
Here’s a look at four real estate tips investors should know of in the present market.
1. Investment in shops
Investors can look for investment in retail spaces. The maintenance cost of a store is relatively low compared to private properties. Moreover, shops offer security, and the chances of infringement are negligible, especially if one invests in a space at a shopping center.
In India, the coordinated retail and shopping center culture is on the rise, and it is expected to continue growing. Thus, keeping an interest in a retail property can be a prudent choice.
Additionally, the entry cost is moderately low, and depending on an investor’s financial plan, they can select the size and location of the shop.
2. Short-term buy and hold
The buy-and-hold strategy is ideal if one does not want to be a landowner but wants to benefit from the property’s appreciation. As per the strategy, one purchases a property (usually an undervalued property), renovates it, and rents it out. The goal is to earn a significant profit within 2 to 5 years. It is possible to do so by renovating, increasing the rent, and buying property in an area that appreciates regularly.
Financial investors with relatively little capital available but capable of repairing properties can opt for the buy-and-hold system. These investors can enhance the property’s value to procure rental income and capital appreciation on selling the property.
However, this real estate strategy may pose the threat of a major loss if the market crashes. One must actively manage the property and the tenants to benefit from the investment.
3. Commercial real estate
One of the popular choices to invest in real estate is commercial properties since they offer higher rental yields. As the workforce resumes work in professional spaces, the economy is moving forward, improving the performance of the commercial realty market.
The demand for work areas has increased with the labor force getting back to work. E-commerce businesses are also showing an interest in warehousing. Builders and developers are strongly using innovation, which has transformed into a vital instrument in the commercial land market.
4. Real estate investment trusts (REITs)
REITs, or real estate investment trusts, are corporations similar to mutual funds for real estate investors. These entities let individuals invest in real estate without the ownership of physical property. Investors buy shares of REITs and earn a dividend for the investment. This is quite similar to buying units of a mutual fund. Generally, these organizations own commercial land, including retail spaces, lodgings, apartments, and places of business. REITs are likely to offer high profits, making them a great choice during retirement. Financial backers not interested in regular pay can opt for reinvesting the profits to further develop their investment.
The bottom line
There are different ways to invest in real estate. The choice of strategy depends on one’s needs, goals, and risk tolerance. After reading about four real estate investing tactics, the investor must identify the route up the financial mountain. Each strategy has its advantages and disadvantages and needs adequate research.
Most investors plan a mixed strategy keeping in view the current market scenario. For instance, one can start with a short-term buy and hold and then transition into a commercial real estate investment. Real estate investment can be an entrepreneurial venture. One must not be afraid to try different strategies. Investments in real estate can be considered long-term, like investments in mutual funds, stocks, and debt funds.
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