On several occasions since in magazine IG and in line with the views of various specialists, we note that the option of investing in bricks is the darling of investors in unstable countries like ours, given the low confidence in the financial system and the capital market.
But beyond the geography of one’s choice or the type of real estate investment focuses on the acquisition of houses, apartments, offices, garages and all the options we are analyzing in our publications, today we will stop investment in two ways: the buy and sell in the short term and in succession, or to purchase and retain ownership for a longer time period.
What is the most appropriate investment strategy? Well, there is no single answer. The decision to choose one method over the other should be part of an explicit strategy in turn is part of the general investment goals of each person, and must also adapt to the opportunities of the market. Then we will discuss these two types of investment and see what are the advantages and disadvantages in each case. The idea is that everyone can find out which one fits more appropriately to your investor profile.
But before turning to each strategy, let’s very briefly four main reasons why it may be beneficial to invest in real estate:
1. The properties provide a more predictable income than bonds or shares.
2. The properties tolerate the vagaries of inflation because the value of income and cash flow often rises as much as the inflation rate.
3. Real estate provides an excellent place to locate the capital at a time when investors are unsure of the chances in the stock market, bonds and shares, or when these options appear to be inadequate in the long term.
4. Net assets resulting from investment in real estate provides an excellent foundation to finance other investment opportunities.
Buy and sell short-term
In principle, the first apparent advantage of changing (buying and selling) properties in a short time is the ability to effectuate an immediate profit. In such cases, the key is to find a good that, with minimal investment, raise value and satisfying the requirements for a quick sale.
For most investors, change properties can be considered a more long-term tactic. But the transaction costs are much higher on both sides: the sale and purchase, and therefore, can significantly affect earnings.
There are two types of properties that fall within the scheme of buying and selling in the short term. First, we might mention the houses or apartments that are purchased below current market values, since they are in difficult financial situation. Second are the properties that have a structural problem or design that can be modified or resolved to increase its value. In the latter case, the buyer invests capital to raise values as opposed to simply buying a property for a low base in order to create broader investment gains. Of course, it is also possible to combine these two strategies when you buy and sell properties, and many investors are devoted to it in the alternative.
Of course, you have to take time, experience and ability to deal with taxes and additional costs involved in such operations “fast.” On the other hand, find these investment opportunities in the short term may be difficult, unlike other opportunities that can be sustained over time.
Buy and hold property
It is generally believed that buying and maintaining a property is an ideal recipe for a surprising enrichment. Most people who amassed great
fortunes in the U.S. and in many other countries did accumulate large tracts of land. Even after periods of depreciation of land values almost always recover in the long term, for one simple reason: there is a limited amount of land.
However, owning a long-term ownership involves a lot of administrative and legal issues that investors in stocks and bonds never have to face. In fact, it is an investment strategy for many investors do not have the right skills.
Most investors, especially those who become the first owners of rental properties are ill prepared or ill equipped to deal with the responsibilities of managing such properties. The process of finding qualified tenants and meet their needs, in addition to ensuring the maintenance of the property can be stressful and time consuming. And a successful management is essential for the investment is really helpful.
Choose a strategy
In order to choose the right tactics, the investor should consider some basic questions. Real estate investment, is it a central part of an overall investment strategy? Is it fits into the overall goals? Do I have a proper plan in which you insert? How much risk and how much profit is appropriate for my investment portfolio? Do I have adequate tolerance and ability to assume the administrative responsibilities that come along with each type of investment?
The choice between the two strategies depends on the situation of each particular financial and investment goal. Training, information and planning are essential at the time of opting for one of these alternatives.
What form is best suited to your profile?
Tell me what you think about the strategy most appropriate for you.
Until next week good investment!
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