When you’re looking to enter the world of investing, it can sometimes be like drinking information through a fire hose. It can be hard to determine which strategies are legitimate, and which ones will just lead to you wasting your money. In general, though, investing strategies can be broken down into three main approaches: appreciation, immediate cash flow, and a more balanced approach. These strategies apply regardless of the investment vehicle, though they tend to be most discussed within the realm of real estate investment.
Appreciation
Appreciation is simply put as playing the long game. When you use this type of strategy, you’re aiming to buy an asset when it’s priced relatively low, with the aim towards selling it later when the price eventually rises. Appreciation is a solid strategy for investment vehicles that are known to increase in value reliably over time – such as real estate. Additionally, it tends to be the domain of the relatively risk averse. Most investors have a degree of confidence that the value of real estate will consistently rise over time, even accounting for occasional corrections in the market. This strategy can be especially attractive to investors who are looking to build intergenerational wealth that they can pass down to their children. It’s not a strategy that should be utilized by those looking to make money quickly, but it still has highly significant profit potential for those who are able to hold on to a property for a significant length of time.
Cash Flow
This investment strategy seeks to immediately turn the investment instrument into a vehicle for passive income. In this strategy, investors are likely to turn their assets into rental properties. Rents are set high enough to pay for all operating expenses, the mortgage, and turn a profit. This is an attractive strategy especially nowadays considering a legitimate crisis in the availability of housing stock, and subsequently high rental asking prices. Additionally, the underlying asset may also appreciate over time, though this isn’t the primary goal of the investor.
Balanced
This approach seeks to mitigate risk by combining the appreciation and cash flow approaches. In most cases, this looks like renting out the property in the interim and reinvesting the profits into the mortgage in order to rapidly increase their equity in the property. This helps to insulate against the effects of a sudden, catastrophic real estate correction as was seen in the 2008 financial crisis. It has the potential to provide the veritable “best of both worlds”, but as a result may be more highly sought after by investors, thus making properties suitable for this approach more difficult to obtain.
At FundFind Lending, we can help you to make your real estate investment dreams a reality. Contact us today to find out how we can help you rapidly raise the capital you need and reach your goals!