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What are the various styles of real estate investment strategy and factors that affects property investment
 

What are the various styles of real estate investment strategy and factors that affects property investment

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Are you an investor looking to invest in real estate? What are your motivations for investing in real estate? In this document, we will consider motivations for real estate investment, variables that ...

Are you an investor looking to invest in real estate? What are your motivations for investing in real estate? In this document, we will consider motivations for real estate investment, variables that affect property market, and various styles of real estate investment patterns.

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    What are the various styles of real estate investment strategy and factors that affects property investment What are the various styles of real estate investment strategy and factors that affects property investment Document Transcript

    • Styles of real estate investment strategy and factors that affects property investment Are you an investor looking to invest in real estate? What are your motivations for investing in real estate? In this document, we will consider motivations for real estate investment, variables that affect property market, and various styles of real estate investment patterns. The investor must consider many variables when acquiring income properties:  Market Factors (Demand & Supply)  Occupancy Rates  Tax influences  Level of risk  Amount of debt financing  Proper framework to measure return on investment Motivations for investment:  Rental income  Capital appreciation  Portfolio diversification  Tax benefits Aggregated and Prepared by: www.nirrtigo.com Green Realtech Projects Pvt. Ltd Real Estate Projects India | User Ratings & Reviews | Common Cause | Discussions | Research Page
    • Styles of real estate investment strategy and factors that affects property investment Demand and Supply for real estate: Because of highly competitive nature of the industry and its difficulty in forecasting demand, there are certain times when excess supply is unintentionally produced, thereby increasing vacancy rates, reducing rents, and causing volatility in property values. As an example, even though there may be a definite need for additional space for IT parks in Gurgaon, the potential for overdevelopment will exist as each developer rushes to deliver additional space to the market before competitors. This phenomenon creates a cyclical pattern in real estate industry. For example, if the demand for particular property type is less and supply is in excess, then occupancy level and rents will be lower. However, as the demand picks up, the property type will start recovering and occupancy levels and rents will move up. On the contrary, if demand for particular property type is more and supply is less, then occupancy level and rents will be higher. However, as more space is developed, the property type will come into the balanced stage and occupancy level and rents will come down to optimum/normal stage. The idea is to understand, what the demand for particular property type is and how much space is already available. As an example, the demand for IT office space in Delhi NCR is high; however we need to measure the current available space and future developments. Aggregated and Prepared by: www.nirrtigo.com Green Realtech Projects Pvt. Ltd Real Estate Projects India | User Ratings & Reviews | Common Cause | Discussions | Research Page
    • Styles of real estate investment strategy and factors that affects property investment Styles of real estate investment: A. Investing in core properties: this style is based on a goal of acquiring existing, seasoned, relatively low risk properties that are pre-leased (at least 80% of total space) to good credit tenants with long term lease. B. Investing in core properties with “Value Add strategy”: A + Strategy to make changes in the management of the property or by making some specific capital improvements. These later changes are very specific and are targeted toward increasing rents and outperforming competing properties in the same submarket. C. Property Sector Investing: this style is based on the belief that over the long term, based on economic and demographic research, one property type will outperform other property sectors. Once the sector is chosen based on solid fundamentals, the specific properties in specific cities and locations would be acquired. (This style is analogous to mutual funds that are created to invest only in stocks in specific industry sectors, such as computer, energy industry). D. Contrarian Investing: Contrarians believe that investors tend to overreact to negative news and tend to oversell out of favor properties. For example, investors may believe that shopping on the internet may have a negative effect on retail properties and if majority of investors believe that these investments will perform poorly and sell them, a contrarian may wait until these properties become available at very low prices, and then purchase them with the expectation that after other investors realize that this property sector has been oversold, a price recovery will occur. E. Market Timing: Market timers tend to emphasize current supply/demand or cyclical conditions in their evaluation of property types. Based on the demand/supply understanding, properties are sold when prices are at peak and bought when prices are lowest. This is based on sound knowledge of fundamentals, whereas contrarian acts on external events such as e-commerce having an impact of retail properties. F. Growth Investing: identifying the growth industries and related property type is the essence of this style. For example, growth in IT sector will result in office space requirements in strategic geographical locations. A growth investor will search for those strategic locations to invest in office properties. These properties would be purchased with the expectation that as more investors discover these markets and properties, they will drive up the prices, thereby producing superior returns. G. Development Investing: this style usually involves the acquisition of land, design of the building, and a leasing program to reach stable occupancy. Aggregated and Prepared by: www.nirrtigo.com Green Realtech Projects Pvt. Ltd Real Estate Projects India | User Ratings & Reviews | Common Cause | Discussions | Research Page
    • Styles of real estate investment strategy and factors that affects property investment About NirrtiGo NirrtiGo is owned and founded by Green Realtech Projects Pvt. Ltd. NirrtiGo is an online real estate platform to find, discuss, review, rate, and track real estate & property in India. Aggregated and Prepared by: www.nirrtigo.com Green Realtech Projects Pvt. Ltd Real Estate Projects India | User Ratings & Reviews | Common Cause | Discussions | Research Page