Are you an investor looking to invest in real estate? What are your motivations for investing in real estate? In this document, we will consider motivations for real estate investment, variables that affect property market, and various styles of real estate investment patterns.

1. Styles of real estate investment strategy and factors
that affects property investment
Are you an investor looking to invest in real estate? What are your motivations for investing in
real estate? In this document, we will consider motivations for real estate investment, variables
that affect property market, and various styles of real estate investment patterns.
The investor must consider many variables when acquiring
income properties:

Market Factors (Demand & Supply)

Occupancy Rates

Tax influences

Level of risk

Amount of debt financing

Proper framework to measure return on investment
Motivations for investment:

Rental income

Capital appreciation

Portfolio diversification

Tax benefits
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2. Styles of real estate investment strategy and factors
that affects property investment
Demand and Supply for real estate:
Because of highly competitive nature of the industry and its difficulty in forecasting demand,
there are certain times when excess supply is unintentionally produced, thereby increasing
vacancy rates, reducing rents, and causing volatility in property values. As an example, even
though there may be a definite need for additional space for IT parks in Gurgaon, the potential
for overdevelopment will exist as each developer rushes to deliver additional space to the
market before competitors.
This phenomenon creates a cyclical pattern in real estate industry.
For example, if the demand for particular property type is less and supply is in excess, then
occupancy level and rents will be lower. However, as the demand picks up, the property type
will start recovering and occupancy levels and rents will move up.
On the contrary, if demand for particular property type is more and supply is less, then
occupancy level and rents will be higher. However, as more space is developed, the property
type will come into the balanced stage and occupancy level and rents will come down to
optimum/normal stage.
The idea is to understand, what the demand for particular property type is and how much
space is already available. As an example, the demand for IT office space in Delhi NCR is high;
however we need to measure the current available space and future developments.
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3. Styles of real estate investment strategy and factors
that affects property investment
Styles of real estate investment:
A. Investing in core properties: this style is based on a goal of acquiring existing, seasoned,
relatively low risk properties that are pre-leased (at least 80% of total space) to good
credit tenants with long term lease.
B. Investing in core properties with “Value Add strategy”: A + Strategy to make changes
in the management of the property or by making some specific capital improvements.
These later changes are very specific and are targeted toward increasing rents and
outperforming competing properties in the same submarket.
C. Property Sector Investing: this style is based on the belief that over the long term, based
on economic and demographic research, one property type will outperform other
property sectors. Once the sector is chosen based on solid fundamentals, the specific
properties in specific cities and locations would be acquired. (This style is analogous to
mutual funds that are created to invest only in stocks in specific industry sectors, such as
computer, energy industry).
D. Contrarian Investing: Contrarians believe that investors tend to overreact to negative
news and tend to oversell out of favor properties. For example, investors may believe
that shopping on the internet may have a negative effect on retail properties and if
majority of investors believe that these investments will perform poorly and sell them, a
contrarian may wait until these properties become available at very low prices, and then
purchase them with the expectation that after other investors realize that this property
sector has been oversold, a price recovery will occur.
E. Market Timing: Market timers tend to emphasize current supply/demand or cyclical
conditions in their evaluation of property types. Based on the demand/supply
understanding, properties are sold when prices are at peak and bought when prices are
lowest. This is based on sound knowledge of fundamentals, whereas contrarian acts on
external events such as e-commerce having an impact of retail properties.
F. Growth Investing: identifying the growth industries and related property type is the
essence of this style. For example, growth in IT sector will result in office space
requirements in strategic geographical locations. A growth investor will search for those
strategic locations to invest in office properties. These properties would be purchased
with the expectation that as more investors discover these markets and properties, they
will drive up the prices, thereby producing superior returns.
G. Development Investing: this style usually involves the acquisition of land, design of the
building, and a leasing program to reach stable occupancy.
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4. Styles of real estate investment strategy and factors
that affects property investment
About NirrtiGo
NirrtiGo is owned and founded by Green Realtech Projects Pvt. Ltd.
NirrtiGo is an online real estate platform to find, discuss, review, rate,
and track real estate & property in India.
Aggregated and Prepared by: www.nirrtigo.com
Green Realtech Projects Pvt. Ltd
Real Estate Projects India | User Ratings & Reviews | Common Cause | Discussions | Research
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