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Real estate investing is an exciting and profitable way to grow your wealth. It can be intimidating to new investors. In this article, we will provide beginner-friendly strategies for investing in real estate as well as terms and tricks to help you get started.
There are a myriad of real estate investment strategies. One of them is the “buy and hold” strategy. This involves purchasing and holding properties for the course of a long time to reap the benefits of property appreciation while earning passive income from rental payments. This strategy can be a hedge against inflation as rents can be adjusted to keep up with inflation, or even surpass it. It also helps diversify your investment portfolio.
Another real estate investment strategy, known as a”core” strategy involves purchasing fully leased properties with “high-credit” tenants and relying on a small amount of leverage. This strategy has a lower level of risk and a steady cash flow as compared to other strategies. However, it generally provides less potential for capital appreciation.
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 leased and sold at an income. This method is moderate to high risk, but gives higher returns than core investments and the potential for significant gains.
Additionally, there is an possibility of investing in REITs (real estate investment trusts), which are companies that buy and manage income properties, and trade on major stock exchanges. This strategy can provide a diversified real estate exposure and low correlation to other asset classes. However it does not give directly controlled control or tax advantages similar to owning your own home.