From San Francisco to London, primary real estate markets are proving difficult to navigate for first-time buyers. Even with a sizeable deposit and respectable income, the most desirable city neighbourhoods may be out of reach. Here are a few real estate investment strategies to consider which will help you get more for your money.
Get outside the city: 4 alternative real estate investment strategies
1. Plots of land
Vacant land is often overlooked by investors, but it's well worth looking into as an alternative real estate investment opportunity. It may not immediately produce rental yields, but because land is a finite resource it remains secure. Unlike buy-to-let properties, no maintenance is needed – which means you can save your funds for a future development instead. Look at it as a long-term investment and purchase a plot in the path of urban growth to help ensure a payoff down the line; one which could be large enough to help you realise your primary market goals.
2. Vacation homes
In regions like California, savvy buyers are choosing to rent in the city during the week and commute to holiday homes on the weekend. With basic properties stretching well beyond the $1 million mark in Los Angeles, commute-friendly resort towns like Palm Springs provide vacation homes complete with mid-century architecture, landscaping and outdoor pools for a lower price tag. The benefits of purchasing a vacation home and renting in the city are many; these types of real estate investment strategies are a money-making asset that can be let out to holidaymakers when not in use. Properties in smaller towns within commutable distance from a major city are also likely to increase in value as more urban homebuyers are pushed out of the primary market, making for capital growth.
3. Mixed-use properties
According to Savills Europe, alternative assets formed one quarter of European real estate investments in 2015, up from 15% in 2007. The UK market accounted for 50% of these alternative real estate investments, followed by Germany at 25%. Throughout Europe, the most popular type of alternative investment asset was mixed-use property. Developments with both commercial and residential spaces are in hot demand, offering an alternative type of investment to the usual city home. With long-term leases and a high degree of flexibility, they can prove to be a reliable investment for buyers.
4. Student accommodation
Accommodation for students is another sector of alternative real estate investments that’s growing steadily. Student housing accounted for 12% of alternative asset transactions in 2015. First-time buyers may benefit from investing in this type of accommodation, as it can be rented out to students while appreciating in value. If properties within the urban centre are out of reach, look at smaller university towns or rural campuses for more affordable real estate investment strategies. Brush up on market trends to formulate your strategy.
If you’re currently priced out of the primary market, don’t write off your chances of finding a fruitful property investment. Instead, view our property insights for more ideas about where to strategically buy and sell with the bigger picture in mind. In many cases, it’s the secondary markets like holiday hotspots that can provide a satisfying, lucrative solution.