Once you have decided to invest in real estate, you need to be abreast with how you can navigate through any of these strategies to become a successful real estate investor.
These investment strategies are available for you to adopt, including;
Property Sector Investing – this strategy of investing is based on the belief that over the long term, based on economic and demographic research, one property type will outperform other property sectors.
So, after you have engaged a qualified property consultant and done your research. If the research shows that prospects for the office sector for example are excellent and that it will outperform the other sectors like retail, apartment, and warehouse property sectors over the long term, then you can specialise in office property market as a preferred sector of your investment.
Contrarian Investing - this strategy is based on the premise that some major economic, technological, or other event will make the investment outlook for a given property type poor and ‘out-of-favour’ among investors. A contrarian investor believe that investors tend to overreact to negative news and tend to oversell out-of-favour properties.
If the majority of investors believe that such out-of-favour investments will perform poorly and sell them, adopting the contrarian strategy, you can decide to wait until these properties become available at very low prices, and then purchase them with the expectation that after market has realised that that property sector has been oversold, a price recovery will occur.
Available to you also is the Market Timing investing strategy – with this, market researchers believe that with an understanding of the stage of each property type in the real estate cycle and future economic conditions, it is possible to predict when to buy or sell properties.
So, if your research shows that occupancy and rents will improve in a segment like retail, and that the retail market has passed the bottom of its cycle and is in a recovery phase, then retail market in that market would become a target investment for you as a ‘market timer’.
You again have the Value Investing strategy to consider - this strategy is more of a ‘tried and true’ performance approach. Thus, when your research finds some properties that have been ‘overlooked’ by investors, you may adopt this option and invest in them.
In such investing, you try to identify properties with the ability to produce greater-than-expected income and appreciation.
Another strategy is the investing in ‘Trophy’ or ‘Blue Chip’ Properties - that is, only very visible, well located properties (trophy properties) are targeted for acquisition by you. investors in trophy assets believe that properties with some unique historical, architectural, or locational attribute (e.g., Standard Chartered building) will prove to be excellent investments for the long term.
You may therefore target only such properties.
Available to you also is the Arbitrage Investing strategy - where through you research, if you are able to recognise differences in prices that buyers are willing to pay for the same real estate investments in different markets, then you buy such property in one market and sell it another market.
For example, you may buy a property(s) directly in private market transactions and then earn a profit by creating a publicly traded entity, such as a REIT, and issuing stock to the public. In that case, positive arbitrage profits are realised when the total market value of the REIT stock sold to the public exceeds the acquisition cost of the individual property(s) plus the cost of issuing stock.
But remember, in the earlier write up, I indicated that, currently there is no legislation for the trading of REITs in Ghana, so you may be helped out in this regard with respect to arbitrage investing strategy unless you would like to invest in diaspora secondary market.
Do not forget that, contacting the right property market consultant is a key step in becoming a successful real estate investor. Conduct your market research with qualified market players.
Reference: Commercial Real Estate Analysis and Investments 3rd Edition by David Geltner, Norman G. Miller, Dr. Jim Clayton and Piet Eichholtz
Source: Mohammed Bomanso Issah (Real Estate Times Africa)
