Continued from Yesterday’s post….
Now that we know the various types of real estate investments an investor can undertake, it is time to look at the different strategies an investor can use to unlock value from his real estate investment. While you can use any of the investment vehicles discussed yesterday in your career, you must next learn an investment strategy that you can apply to that niche. As an investor you will use a variety of strategies when dealing with these investment niches to produce wealth.
This article series explores three of the most common strategies that you can use to make money in real estate.
Buy and Hold
Perhaps the most common form of investing, the “buy and hold strategy” involves purchasing a property and renting it out for an extended period of time. It is probably the most simple and purest form of real estate investing that there is. Essentially, a “buy and hold investor” seeks to create wealth by renting the property out and either collecting monthly cash flow or simply holding the property until it can be sold for a gain in the future. the advantage is that the investor may receive cash flow from renting out the property.
By far the most common mistake that we see new investors make with this strategy is buying bad deals because they simply don’t understand property evaluation. Other common problems include underestimating expenses,making bad decisions on tenant selection, and failing to manage properly.
These mistakes can all be avoided, however, if you simply learn the business; jumping in without proper education can be extremely costly financially and sometimes, legally.To properly carry out the buy and hold strategy, an investor should learn how to properly identify the ebbs and flows of the market that a property is located in. Ultimately, when they perceive the market and the properties they are interested in to be at a low point (prices low, inventory high), the buy and hold investor seeks to purchase properties. When the market becomes over-heated, an experienced buy and hold investor will usually stop buying until they see things settle back down. During these slow periods, they may sell or simply continue to hold their properties.