Property Investment StrategiesProperty investment strategies vary depending on the risk and return objectives of the investor. In terms of returns, we can distinguish two main strands; strategies that give more emphasis on stable recurring income cash flow and strategies that give more emphasis on capital appreciation, which is a longer-term objective and provides a one-time benefit when the property is resold.
Strategies for Stable Cash Flow
Property Investment Strategies for stable cash flow focus on commercial properties (offices, shops, shopping centers, warehouses, distribution centers) that are fully or almost fully leased with long-term leases to strong credit tenants. These properties are bought for the stable income they can produce month-after-month. Since the income comes from long-term leases to strong credit tenants that are unlikely to default on their rent payments the risk of investing in such properties is low. For this reason, these properties are bought by low return low-risk cash-flow focused investors at very competitive market yields, which vary by country and property type.
Strategies for Strong Capital GainsProperty investment strategies aiming primarily at capital gains focus on properties that have good prospects for strong increases in their value. Not all properties at any market and any location have such prospects. Strong value increases are triggered by particular market and economic synergies, as well as location-specific forces. There are several categories of properties with double-digit capital gain potential. These are discussed extensively in the book “Real Estate Investing for Double-Digit Returns”. In general, properties with strong value increase potential are located in balanced or supply-constrained markets with strong economic growth potential or properties that are mismanaged and have significantly greater income-earning potential than the one produced under their current state. Properties that are bought significantly below market value because of special circumstances can also allow for significant capital gains when sold under normal circumstances. Finally, land development can also allow for significant capital gains, when land is bought at the appropriate price.Strategies for both Stable Cash Flow and Strong Capital GainsProperty investors can find opportunities that can allow for both cash-flow and strong capital gains potential. These are fully leased commercial properties with significant lease rollover over the next five years, in markets with strong economic growth and constrained supply of commercial properties. Also, fully leased or almost fully leased commercial properties in emerging countries where cash flows can be bought at high yields and can be resold at considerably lower yield, and therefore higher price, after a few years when yields decline as the market matures and becomes more attractive and less risky to investors.
Search Our Over 500-Page Website!  Custom Search References Real Estate Investing for Double-Digit Returns The Commercial Real Estate Investor's Handbook: A Step-by-Step Road Map to Financial Wealth Real Estate Investing for Dummies What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures Confessions of a Real Estate Entrepreneur: What It Takes to Win in High-Stakes Commercial Real Estate The Pre-Foreclosure Real Estate Handbook: Insider Secrets to Locating and Purchasing Pre-Foreclosed Properties in Any Market Related Posts Return From Property Investment Strategies to Property Investment Strategy |
