Real Estate Investment Strategies

By: George Hill

Why did I choose this topic?

• Recently Licensed Texas Real Estate Sales Agent
• Interested in the Real Estate Industry and Investments
• Plan to study Real Estate and Finance in college

What is Real Estate?

• Real estate is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made.
• Types of Real Estate
• Residential
• Commercial

​

Why is Real Estate Important?

• Real Estate provides people with homes, offices, and warehouses- places to live work, and play.
• Sells a scarce resource which is land.
• Contributes to job growth and economic benefits for communities.

Why you should invest in Real Estate

• Importance of diversification in a portfolio
• Tax Incentives
• Passive Income
• Stable Cash Flow
• Protection from Inflation
• Increase in Capital

What are some ways you can invest in Real Estate?

• Long Term Buy/ Hold (Asset Appreciation)
• Development/ Redevelopment
• Real Estate Investment Trusts (REITs)

Long Term Asset Appreciation (Buying and Holding)

• The strategy with the least amount of risk
• Preferred investing strategy of Warren Buffett
• Involves buying a property and holding onto it for a long period of time
• Offers a high Return on Investment (ROI)
• Generates passive income while renting out house to others
• Downsides include paying for maintenance, illiquid (takes a while to sell), changing neighborhood

CASE STUDY: 5337 Collinwood Avenue

• Property was bought in 2007
• Was not used as primary residence
• Few improvements made
• Value appreciated over time
• Sold at a later date for profit

Development (Fixing and Flipping)

• Involves buying a dilapidated property and fixing it and reselling it for a higher value
• Short-term compared to buying and holding
• More risky because of increased holding costs, unexpected expenses, and increased taxes

Shooter’s Palace

Before:

​

After:

Shooter’s Palace Continued

• Found off market opportunity
• Good Structure
• Great Location
• Value of Improvements were purchased below replacement cost
• Redeveloped property sold higher than development cost

Real Estate Investment Trusts (REIT)

• A REIT is a trust that owns and manages income producing properties
• A benefit to investing in these is that you do not have to manage the properties yourself instead you invest in the company and they do all of the work
• REITs however are liquid compared to normal real estate investments meaning that they can change easily
• Offer little capital appreciation

Simon Realty Group - Example

• REIT
• Manages Clearfork Shopping Center
• Generate $5.7 Billion in Consolidated Revenue
• Specializes in the ownership, development, management, leasing, acquisition, and expansion of real estate assets

​

Conclusion

• Real Estate is a worthwhile investment where one can earn income passively and can increase wealth.
• Although Real Estate can be a very costly investment it is very worthwhile as the benefits to it far outweigh the negatives due to the possible tax cuts, diversification, stable cash flow, and protection from inflation

Sources

Behere, Bhagyesh. "Pros and Cons of Flipping Houses: Is It Worth It?" Houzeo. Accessed December 6, 2024. https://www.houzeo.com/blog/pros-and-cons-of-flipping-houses/#:~:text=The%20repairs%20and%20renovations%20will,you%20make%20from%20the%20flip.

​

The CE Shop. Accessed November 1, 2024. https://theceshop.com/.

​

Chen, James. "Real Estate: Definition, Types, How to Invest in It." Investopedia. Last modified May 31, 2024. Accessed October 25, 2024. https://www.investopedia.com/terms/r/realestate.asp.

​

———. "What is Flipping? Definition, How It Works, Types, and Example." Investopedia. Accessed November 7, 2024. https://www.investopedia.com/terms/f/flipping.asp.

​

"FAQ." Simon. Accessed December 11, 2024. https://investors.simon.com/stockholders/faq#:~:text=Simon%20Property%20Group%20is%20a,Estate%20Investment%20Trusts%20(NAREIT).

​

Gratton, Peter. "REIT: What It Is and How to Invest." Investopedia. Accessed December 6, 2024. https://www.investopedia.com/terms/r/reit.asp.

​

Hawrylack, Sam. "Why Invest In Real Estate? 10 Reasons And Benefits." Rocket Mortgage. Accessed December 6, 2024. https://www.rocketmortgage.com/learn/benefits-of-real-estate-investing.

​

Palmer, Barclay. "Key Reasons to Invest in Real Estate." Investopedia. Accessed December 6, 2024. https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp#:~:text=On%20its%20own%2C%20real%20estate,Internal%20Revenue%20Service.

​

Rohde, Jeff. "The pros and cons of a buy-and-hold real estate strategy." Roofstock. Accessed December 6, 2024. https://learn.roofstock.com/blog/buy-and-hold-real-estate.

​

TREC. Accessed November 1, 2024. https://www.trec.texas.gov/.

​

Tun, Zaw Thiha. "Pros and Cons of a Passive Buy and Hold Strategy." Investopedia. Accessed November 1, 2024. https://www.investopedia.com/articles/active-trading/070715/pros-cons-passive-buy-and-hold-strategy.asp#:~:text=Key%20Takeaways,giants%20such%20as%20Warren%20Buffet.

​

"Why Real Estate Is Important." RE Solutions XV. Accessed December 6, 2024. https://www.resolutionsxv.com/post/why-real-estate-is-important#:~:text=Job%20Creation,the%20industry%20for%20employment%20opportunities.