There are three different types of real estate investment strategy that are effective. These include the methods of bargain purchase, increase value, and double digit cap rate.
Bargain purchasing means the purchase of real estate property that is below the current market value that. A good investment strategy is to purchase the real estate at a price of at least 20% less than current market value.
The increase-value strategy entails that you will purchase real estate at its current market value. However, you will only be choosing properties with some unrealized level of potential. After you complete your purchase, you must be willing to make whatever changes are needed to elevate the property value. Generally speaking, you must be able to increase the value of the property for at least 20 percent in order for this to be a worthwhile strategy.
The Double-digit cap rate investment strategymeans that you purchase the property on certain terms that it has a 10 percent or greater capitalization rate. To obtain the capitalization rate take the net operating revenue which is the rent less operating expenditure but prior to debt service, divided by the price of the purchase.
It is the cash-on-cash return rate that you would obtain if you outright owned the property. If there is no bargain purchase, it can be find to double-digit cap rates. They usually solely exist on a temporary basis in markets that are depressed markets or in market niches which are small.
The most common strategy forreal estateinvesting is to buy properties that you believe will soon increase in value as a result of market wide appreciation. However, you must purchase the property at the right time and in the right locale in order for this strategy to be successful. You must be aware of market fluctuations and risks as the market changes. Being able to act quickly and with certainty will determine the success of the real estate investment. Many billions of dollars have been made using this method but there is an element of precise timing that the investor must possess.
Other direct methods of successful real estate investment include long term and flipped properties.You will hold onto a property for several years and sell it when market conditions are right in a long term investment. Flipping the property is done very soon after purchase in the event that you can sell it for more than you purchased it for.
Various methods of direct investment can require certainamounts of time to devote to real estate acquisition and depend on the amount of cash that you have available. Certain strategies, such as purchasing foreclosures can demand large amounts of cash. However, some require no cash, including purchasing judgments which are real estate secured or from buying at builder auctions. Freed cash can make for an easier investment life. You should also take advantage of your real estate related aptitudes and employ strategies that allow you to maximize your strengths and minimize your weaknesses.