Determining your Real Estate Investment Objectives

Real Estate Investment

Malcolm Gladwell states that it takes 10,000 hours of practice to become an expert at something. That means it would take nearly five years to become an expert at a discipline if you practice every weekday for eight hours. Yet when it comes to real estate, some people think that watching a few hours of house-flipping shows on HGTV is enough experience to get started and be successful.

Bernard Klein, founder of real estate brokerage Blooming Sky, encourages new investors to start slowly and not rush into big investments. He says, “It’s very tempting to look around and see seemingly everyone making money in real estate and feel like you should be doing the same, but you need to proceed with caution. The fact that many real estate investments involve mortgages and large loans means that you could end up owing a lot of money you don’t have if your investment doesn’t pan out.”

Real estate investments come in all shapes and sizes. Whether you’ve considered looking for an investment in an urban metropolis like New York City or a fix and flip opportunity in Austin, Texas, there is something out there for everybody. However, before embarking on a wild goose chase for the “best” investment, it’s important that you first understand what your investment objectives are. Just in the same way that one wouldn’t begin investing in the stock market without first considering the objectives of the investment, the same wisdom holds true for real estate.

Determine Your Investment Horizon: Long-Term vs. Short-Term Hold

The first thing you’ll want to ask yourself is whether this investment is intended to be a long-term vs. short-term hold. Do you want to get in and out, make your money and move on? Or are you looking for something that you’re going to proudly hold in your growing portfolio over many years to come? Once you have the answer to this question, you’ll be positioned to meet your desired investment duration with the appropriate property acquisition strategies that will meet your timeframe.

Evaluate Real Estate Investment Strategies

Let’s begin exploring some of the different real estate investment opportunities that exist and how they may fit into your overall investment plan.

Some Investors Seek Asset Diversification

If you’ve been budgetingmaximizing your income and keeping lifestyle creep at bay, you may be sitting on a mountain of cash, or you have spent much of your life investing in other asset classes like stocks and bonds. Perhaps you have much of your wealth tied up in a specific currency and are seeking to de-risk. Owning real estate can be an important part of the asset mix for diversified investors.

Whether you’re looking to buy into housing stock in an up-and-coming market or looking to park your cash in a multi-million dollar condominium, you’ll have plenty of options to get diversified. If you are looking for liquidity, consider an urban market with high demand and increasing property prices.

The Quick Flip

You’ve probably seen plenty of shows like Property Brothers and Love It or List It, where people add some tender love and care to a beat down house and turn it into gold. Sounds simple, right?

Fixing and flipping properties is an exciting proposition, and in the right market, with the right pricing, you too can pursue this dream. Fixing and flipping is a short-term strategy, as your goal will be to acquire the property, put in the work and resell at a higher price as quickly as possible.

The longer you carry the property, the more it costs you and the lower your margins. Flipping and making a consistent profit takes experience, as there are always surprises that creep up. If you’re looking to get started for the first time, find somebody with experience (meaning several successful flips in different market cycles) and see what you can learn. Pick a market that you can manage and is close by, as you’ll need to be hands on.

You Can Also Focus On Rental Income

If you’re looking to collect rental income every month, then you want to find a property where your monthly fees (mortgage, maintenance, and taxes) are lower than your monthly rental income. Also, you’ll want to consider markets that have appreciating rents, which means that over time your property will continue to become more valuable.

Using a solid retirement calculator can help you determine your cash flow needs as you plan for retirement.

You may want to consider markets close to yours so you can keep a tighter grip on your income property, or you may consider totally different markets all together and hire a management company to take care of the day to day management. Once you start buying properties with rental income, you may find yourself down a path of acquiring more and more, getting to that point where one day you have a passive income stream. Just remember, there’s still work involved like managing tenants, property maintenance and so forth.

You may even decide to rely on Airbnb or other on-demand rental platforms instead of finding traditional tenants. The choice is yours.

Long-Term Hold For The Long Term

When it comes to real estate investing, you don’t necessarily need to get fancy with your investment hypothesis. Simply buying and holding real estate is a builder of wealth. Whether you’re looking for a pure investment play, one that you rent out or looking to move into it as your primary residence, buying into real estate for the long-term is an excellent investment strategy.

Building equity and watching prices appreciate over the long run will build wealth and also doesn’t take much effort. No timing the market or rushing to pay back lenders for a short-term construction loan, buying a property and watching prices go upwards over the long-run is a noble strategy. The key is to not get spooked by short-term fluctuations, which are a normal part of how economic cycles function.

New Development

One way to score big in a property investment is to consider new construction. The key is to buy in early into the sales cycle. This means that you’ll want to be one of the first to sign a contract to purchase, even if the closings are a year or two out. This will guarantee that you will buy into the lowest price that the developer will likely ever offer on any of the properties. The closer to closings the developer gets, the more expensive the respective units will be. This means that if you’ve bought in early, it’s a chance to already be in the money when you close on the property.

Buying new also carries additional risk because it can be hard to determine how sought-after the property will be in the future. On paper, a new development will always look stunning, but beautiful renderings are not necessarily congruous with high returns.

Crowd Funded Investment Opportunities

The rise of crowdfunding real estate platforms like DiversyFund and a host of competitors make it possible to passively invest in larger real estate projects. These investments allow investors to allocate some of their portfolio to real estate without having to worry about actively managing the properties or selecting the right investments. This, however, does not mean that the risks are any lower.

In Closing

There are plenty of real estate investment strategies. Understanding your objectives and duration are key to understanding which strategy is worth pursuing. You may even find yourself torn between several of these. That’s okay! Do your research, talk to people, see what feels right. It’s a big decision with a significant sum of money involved, so it’s essential to take your time and do your homework.

Most importantly, make sure you have a healthy financial foundation with an emergency fund in place and can withstand poor investment returns if your real estate doesn’t perform as well as you thought it would. Your short term memory may trick you into thinking that real estate always appreciates, but the last thing you want is to be fooled by randomness or recency bias.

Source: Forbes

You May also Like this

The New Certificate of ...

The Lagos State Government has said that in next two years 100,000...

Hybrid Work Environment and ...

As I type this, I’m awaiting my next Zoom meeting in what’s...

How to begin Investing ...

can be as simple as saving in a bank or as intensive...

Tips on Real Estate ...

The pandemic may have brought drastic changes to our daily lifestyle, however...

Things to avoid in ...

As an owner of a franchise, one of the biggest decisions you...

Pros & Cons of ...

 could be a very smart financial decision with proper planning and budgeting....

invest in real estate
Strategies to Invest in ...

There are an endless variety of ways to , from taking out...

Real Estate Technology Solutions
Recommended Real Estate Technological ...

Online real estate catalogues include virtual tours of sample flats to give...

Diversification
Diversification Vs Specialization of ...

There are two main schools of thought when it comes to :...

Real Estate Trend
The most common Real ...

is one of the most dynamic industries that have seen some major transitions in...

rental property
Can you buy rental ...

You’ve heard that buying a rental property can be a fantastic way...

Commercial Real Estate
The impact of COVID-19 ...

For a long time now,  real estate has been seen as a cash flow-generating...

Real Estate Market
Business Opportunities in the ...

With the economy fluctuating, more investors turn to the real estate market...

real estate professionals
Things Real Estate Professionals ...

During this , social unrest and an upcoming election, a lot has...

Virtual Real Estate
Blockchain Technology to monetize ...

In the “real” world, has historically been seen as a viable investment....

brrrr
What is the BRRRR ...

If you're part of the business or plan on breaking into it,...

Macroeconomic
Macroeconomic Issues in Real ...

Understanding macroeconomic risk is critical to a successful strategy. While this form...

illiquidity premium
What is Illiquidity Premium ...

Illiquidity premium is the excess return an investor stands to earn in...

renewal
The procedure for the renewal ...

According to Section 1 of the , the law vests the ownership of...

pandemic
Post COVID-19 pandemic and ...

Adapt. Innovate. Accelerate. This is the mantra for any business right now...

Real Estate Wholesaling
Real Estate Wholesaling Pros ...

wholesaling is a kind of arbitrage in which a party known as a wholesaler...

stamp duty
The new Stamp Duty ...

Taxes are one of the ways through which the Government generates revenue...

WFH
How Work From Home ...

Google has announced that it will continue with work from home (WFH)...

Investment Portfolio
Investment Portfolio Diversification in ...

Months after the onset of Covid-19, we continue to see its impact...

path of progress
What is path of ...

As a , you may have heard the term path of progress before. The...

Virtual Real Estate
Increase of Virtual Real ...

Prospective buyers getting their first glimpse of potential homes through smartphone cameras...

Property Managers
Operational Guidelines Property Managers ...

The pandemic crisis has thrown nearly all industries for a loop, and...

Commercial real estate
The Effect of the ...

The real estate industry is changing, a change that started before the...

Disruptive Real Estate
Disruptive Real Estate and ...

What do Google, Microsoft, Facebook, Twitter, Visa and American Express all have...

Post-Pandemic
Outlook of Post-Pandemic Commercial ...

The COVID-19 pandemic is having a transformative impact on (CRE) markets. The...

invest in real estate
Reasons you should Invest ...

Your current financial stability doesn’t guarantee that you’ll be free from financial...

Retirement
Real Estate Investments for ...

Real estate can be an incredible tool to help you prepare and...

Real Estate Industry
Tips to better understand ...

If you're looking to buy or sell property, it's important to have...

Real Estate Investment
Ways of getting involved ...

While many people get involved in real estate to generate a return...

value
How to assess the ...

If you’re investing in property, you’ll need accurate real estate valuations to...

Real Estate Investors
Guiding Principles for Real ...

While the national faces significant uncertainty right now, it's important to recognize...

Real Estate Investing
The largest benefits of ...

Real estate is one of the best possible ways to drive personal...

The Real Estate Market
How the Real Estate ...

If you're looking to buy or sell property, it's important to have...

Remote Working
Remote Working and its ...

Many ask if the remote working culture will be here to stay,...

buying and selling
Real Estate Buying and ...

EASTON — agents and their colleagues have adapted quickly to the new...

unstable market
Investing in Real Estate ...

The industry is filled with its share of ups and downs. In...

real estate investments
Real Estate Investments to ...

There are several types of real estate , but most fall into...

office space
Will the Pandemic make ...

A myriad of publications have already pronounced office space a trend of...

How the pandemic will affect Resident Demands in the future
How the pandemic will ...

The current pandemic and global response is a once-in-a-lifetime event that has...

real estate stock market
The effect of Real ...

Financial market commentators tend to focus on the price of bonds and...

digital asset
How Real Estate is ...

Yesterday, I had a call with one of my company’s larger customers....

Real Estate Agents
Ways Real Estate Agents ...

There is a reason companies like Tesla have such a loyal customer...

Commercial real estate investments
Commercial real estate investments ...

real estate investments will fare well in the face of the coronavirus, which...

Operational Real Estate
The importance of Operational ...

New York, NY—With the shift towards buying an experience over buying a...

Passive Income
Ways to Earn Passive ...

Passive income is an important factor in building wealth and achieving financial...

millennials
The Future of Real ...

We've all seen studies on millennials circulating around the internet. As the...

land
Things to consider before ...

Looking to buy land to build your dream home? Land is the...

Angel Investing
Angel Investing versus Real ...

I’m often asked what my preference is when comparing angel investing to...

Bitcoin Investment
The comparison of Real ...

Two popular avenues, real estate and bitcoin, have been making waves in...

mortgage
How to find the ...

If you’re looking to buy a home or in a single family...

Reserves
The importance of Reserves ...

Private real estate affords investors considerable control over their , from how...

attorney
The importance of an ...

Engaging the right attorney helps you avoid costly mistakes in deals. Especially...

bundle of rights
The comparison of bundle ...

What is “,” really? Most people might say it's the land and/or...

Lagos State Real Estate Law
Laws guiding the Use ...

The regulatory bodies in real estate include but are not restricted to the following;...

Commercial Real Estate Tech
2020 Top Commercial Real ...

Deloitte’s 2020 Commercial Real Estate Outlook surveyed 750 owners, operators and investors in 10...

Mortgage notes
Guide on investing in ...

Most new investors in active real estate start with a traditional method...

real estate rehab
Stages of Real Estate ...

If you play your cards right, rehabbing houses can be very rewarding...

Multifamily
Investing in Multifamily Real ...

Millions of Americans depend on cash flow generated by long-term investment portfolios,...

ways to invest in real estate
Ways to invest in ...

There is a common misconception that real estate investing requires property ownership....

rental properties
Pros and Cons of ...

Many investors understand why they should invest in real estate for the...

urban regeneration
Planners urge Lagos State ...

Planners have charged the Lagos state government to do more detailed master...

Commercial Real Estate Technologies
Trending Commercial Real Estate ...

The commercial real estate industry has entered a new phase of technology...

Real Estate Location as a franchisee
Tips to secure the ...

Real estate site selection has the power to make or break any...

Remote Workers
How Remote Workers affect ...

As more people are able to work from home, housing priorities have...

5G Technology
5G Technology REITs

There is a revolution going on. You’ve probably heard the term 5G...

buyers
Questions Home Buyers should ...

Buying a home is one of the most expensive decisions you'll ever...

remodeling
Mistakes to avoid when ...

Americans are spending less on home renovations than they were at this...

Real Estate Market
Reasons for investing in ...

Are you thinking about purchasing your first piece of real estate? Investing...

real estate funds and REITs
Differences between real estate ...

Are you ready to invest in real estate? Real estate funds and real...

Agents and Brokers
Differences between Real Estate ...

Real estate transactions often involve significant amounts of money. As a result,...

real estate crowdfunding
Real Estate Crowdfunding Investment

Ask a rich person how they got rich, and there’s a good...

Investing Real Estate Market
Investing in the right ...

Investing in real estate is tremendously exciting, and can be very lucrative....

housing in Nigeria
FMBN to build 100 ...

Ahmed Dangiwa, Managing Director, Federal Mortgage Bank of Nigeria (FMBN), said the...

local real estate market trends
Factors that determine Local ...

Real estate markets trend between times of boom and bust, depending on a...

invest in real estate
Affordable ways to invest ...

Real estate can help diversify a portfolio. One way to grow your...

real estate digital finance
8 top concepts of ...

In all history there has never been a more profound era of...

appraisal services
Why you need appraisal ...

Real estate investing can be an excellent way to earn passive income....

real estate agent
12 Qualities in Selecting ...

Purchasing a home is a huge financial commitment, so finding the right...

National Urban Development Policy
Revision of the National ...

The long-awaited overhaul of the National Urban Development Policy (NUDP) has been...

Warehouse
Capitalizing on the Warehouse ...

Everyone knows that retail is evolving, and common thought says that retail...

Mixed-Use Real Estate
Benefits of Mixed-Use Real ...

In cities, mixed-use real estate is hidden everywhere. Someone likely lives above...

dead capital
Real Estate Dead Capital ...

PwC estimates that Nigeria holds at least $300 billion or as much...

Post your Comments

NAME *
EMAIL *
Website

%d bloggers like this: