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Anna Johansson
Anna Johansson
Articles (38) 

A Value Investing Approach to International Real Estate Purchases

Only recently have real estate investors begun applying value investing principles to purchasing properties

August 06, 2019 | About:

Value investing is a key strategy when it comes to selecting stocks; in fact, while Warren Buffett may have made the practice famous, investment experts established the concept back in 1934. Only more recently, however, have real estate investors begun applying value investing principles to purchasing properties. Within such a framework, investors seek out underpriced properties and then apply value-added strategies, such as renovations and redevelopment, to increase their value. This approach should be at the heart of international real estate investment, and should guide both individual investors as well as the real estate agencies that promote those propertie and guide those purchases.

Understanding the industry

In order to successfully apply a value investing approach to real estate purchases, investors need to have a deep well of industry knowledge. This sets the field in contrast to most stock investing, in which the ability to diversify across industries is often more important than deep knowledge of any of those industries. Certainly there is a place in stock investing for industry knowledge, but if you can analyze trends and evaluate statistics, you can often go without. If you’re going to successfully add value to international properties, however, you need to understand the broader construction, housing and design industries, as well as regional trends in tenancy, land use and the economy.

Guidance is value added

While knowing the industry is a key part of value investment, in real estate another vital element is finding a real estate firm that will help you gain that knowledge, and that already has a foothold in key markets. For example, the luxury real estate agency Manhattan Miami considers its ability to help both domestic and international investors navigate high value markets. That means sharing valuable market-specific information with buyers and guiding them through the purchasing process. Especially in highly competitive markets and those that require a significant financial outlay, this kind of guidance can save buyers from making a costly mistake.

Take your time

With all these factors in mind, it’s important to recognize that breaking into real estate as a value investor is a long game. It takes time to gain the fundamental knowledge of regional economic trends, population changes and to identify emerging markets. You’ll also need to take time to visit potential investment sites and get to know the area. This helps prevent culture shock, but more importantly it helps you as an investor apply your knowledge, connect with owners, and get a gut sense of the environment. It’s hard to know what value investing looks like for a given area without walking around and seeing what’s already there.

In addition to spending time in the areas where you’re considering investing, it will also take time to renovate the property and turn it into a higher value offering. Even if you’re just redeveloping the advertising to boost tenancy, you can’t be certain how long it will take for your investment to yield returns.

Keep an open mind

Certain big markets are perennial favorites with real estate-focused value investors because their economies are always growing, but it’s important to keep an open mind about where you’ll ultimately invest. Often the best opportunities are in overlooked markets that have more room for growth. Small to medium cities with vibrant job markets often offer both lower risk and greater potential reward than saturated cities. Take the time to visit those cities, talk to other investors, and determine whether you’ve found a viable market – even if it’s slightly off the beaten path.

Value investing is the best way to transform a low-priced real estate investment into a major source of income, but most people need to look beyond their own backyards in order to find the right properties. By working with an experienced real estate agency and doing extensive groundwork on possible sites, you can find areas primed for growth and transformation.

Disclosure: I do not own any of the stocks mentioned.

Read more here: 

The Game Theory Guide to Investing: What You Can Learn From Jeopardy, OTB and More 

Can You Invest in Companies That Aren’t Publicly Traded? 

Exploring the Relationship Between the Stock Market and Real Estate Prices 

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About the author:

Anna Johansson
Anna is a freelance writer, researcher, and business consultant. A columnist for Entrepreneur.com, HuffingtonPost.com and more, Anna specializes in entrepreneurship, technology, and social media trends. Follow her on Twitter and LinkedIn.

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