Two Approaches to Real Estate Investing

People invest in real estate for two reasons.

I'll talk about the second approach first . Investment real estate is immobile. In fact, that characteristic is why the French and Spanish call it what they do ("propriéte immobilière" and "bienes inmuebles"). That means that real property doesn't disappear and doesn't expire. Its value may go up and down, and its title may be stolen, but it never ceases to exist.

This quality can make properties a reliable place to parkwealth. These qualities can make property a healthy place to park capital, especially for real estate investors who obtain enough income in other endeavors. These buyers superior quality real estate that is dependable and consistent. They are in most cases unconcerned with the rate of return on the investment. They really want realty that can, in the future, stay in demand. it could be city real estate or agricultural land. The key requirement is usually that it be in a location where rule of law and minorities or foreigners are respected.

An illustration of this sort of buyer is a Chinese business person who has made lots of money in China's recent financial boom, but who doesn't have faith in the future of the country. It's important to appreciate, in this circumstance, that a 50 year old Chinese was born in 1961. If his parents were involved in the Party at that time, and had acquired some authority, there is a possibility that they went through some major reversals during the Cultural Revolution which began in 1968. An illustration of this can be found in Xi Jinping, said to be the next President of China. His father, once a Vice-Premier, and former Communist guerrilla, was cleansed in 1968.

Things are totally different now, and that fact is not lost on many of China's nouveau riche. But things could change again. They do not trust Chinese society and would like a sound place for their funds. International real-estate can fill this need.

One other case is the classic one of criminal activity. Proceeds of crime placed into property remain safe. This is the grounds behind money laundering rulings. It has been argued that profits made by raising marijuana has made a contribution to falsely raising Vancouver area property costs.

Those are two extremes of the spectrum, but what they illustrate is a longing for shelter and security, and lower interest in profits and growth.

The same qualities apply to well-to-do men and women looking for an inflation hedge. If local variations are taken out. The critical point is income. The qualities of safety and immobility are gravy.

There can be a clash between the two approaches, although it isn't always in existence. When properties are attractive to buyers seeking growth they can be twice as eye-catching to investors trying to find stability. But, when individuals searching for a safe sanctuary decide to compete with individuals trying to generate income, the stability seekers simply out compete the revenue seekers. They typically have deeper pockets and are not constrained by income investment methods. This has happened in Vancouver, where Chinese money has chased typical income investors out of the market place.