Choose a Property Type:
Without going into details on the many sub-types, property is split into two main types, residential and commercial. Residential encompasses properties which are inhabited, houses, holiday homes, caravans etc. And commercial encompasses commercial premises, offices, office buildings, warehouses, malls etc.
When deciding on a real estate investment strategy, most new investors will think only of residential property, because it is seen as the simpler and least costly type to invest in. More experienced investors however, will almost always choose commercial property because it offers a wider range of opportunities, allowing the investor to be much more versatile in seeking to maximise returns.
Choose an Investment Vehicle:
When I say real estate investing, most people will assume I am talking about buying a property to rent out. However, this is not the only way to do it; there are literally thousands of vastly varied real estate investment opportunities out there.
I could buy a property, or I could simply buy shares in a property development or investment company, or I could invest in a pension fund that invests in property, or a real estate investment trust, and finally I could buy property bonds, or mortgage backed securities. Not to mention the many real estate investment services out there aimed at making all these difficult choices for you.
This is a tough one and an easy one in terms of explaining the choice; tough because the wide range of products on the market makes it nigh on impossible to compare the returns potential by type, but easy because the types are so wildly different.
If you want a true hands-off investment that allows you to choose a strategy based on packages in a brochure and often classified by risk, you should choose one of the fund-based investments. If you like to be more hands-on with your investment, choosing, the locations, the properties and the management then you should buy properties, or controlling shares in an investment company.
Choose an Investment:
While some will attempt to list the best investment products, for the purposes of this guide we will explain how to choose an investment. The simple fact is that all the guides you read on hot markets will get you only so far, in order to make a final choice you need to analyse individual opportunities.
For example Dubai is a dead market at present, and if you looked only from a market level you would give it a wide birth. But rather than toasting a good decision, you could end up regretting a bad one when the economy recovers, because Dubai has among the finest business and technology infrastructures in the emerging Middle East region. With much of that region now clambering out of the aftermath of the Arab summer, the office sector as well as things like factories and warehouses for regional distribution should see returns grow strongly in the coming 5 years and you can currently buy at severely depressed prices.
Likewise, looking at Istanbul from a market down perspective one could assume that residential property investment is the best opportunity, yet the massive influx of shoppers coming from the middle east due to the visa-free deals, the Arab spring and increasing affluence in the region, combined with the Istanbul mall sector being very young, makes for fantastic opportunities in retail investment. Mind you, Istanbul is hot across almost all sectors right now.
Real estate investment in the UK is currently a mixed bag, with practically none of the markets being all good, i.e. house prices falling across the country, amidst a residential rental boom, commercial property investment returns positive but fear it may be levelling off. However, looking at it property by property, investment by investment, the UK presents some good investment opportunities.
In actual fact, looking at individual investments is the best way to go anyway, because it gives us a greater chance of standing stronger against financial shocks, because we are buying solid real estate investment products.