Russ Whitney prefers to categorize real estate as an investment that includes residential and commercial properties as well as mortgage-based securities and real estate investment trusts. For most real estate investors, these investments are characterized as income-generating properties that see revenue from rent earned and capital appreciation from the increase in market value. All this investment flow depends on the net operating income (NOI), maximizing cash flow is key to a successful real estate investment.
To fully understand the importance of cash flow to real estate investment, Russ Whitney suggests that it is necessary to know that the value of the property is directly linked to the NOI. As,NOI is calculated after expenses and both property value and return on investment are depended on NOI, hence it is important to maximize income and minimize expense.
The Risk/Return Profile
Commercial real estate increases in value based on two components says Russ Whitney. The first is capital appreciation from the increase in the market. As properties sell at higher prices, the value of the commercial asset increases. There is very little that an investor can do to mitigate the risk of market increase or decrease.
The other component is the cash flow from income. Revenue is something the property owner has a large amount of control over and which the risk and return balance can be finely tuned.
Russ Whitney prefers getting a good deal is the foundation of any real estate investment. A low investment amount and high revenue make for a good return on investment. Bank-owned and government-owned homes often offer properties at amounts under market value.
A knowledgeable real estate agent with expertise in the form of alternative investment makes it easier to identify opportunities for high returns. For active investors, a real estate analysis seminar helps maximize their investment.
For an alternative investment, Russ Whitney insists real estate is historically correlated to the stock market, making it a good investment to diversify a portfolio. During times of stock market loss, real estate continues to offer returns. Real estate is positively correlated to inflation, that generally increases in value as inflation increases. This makes real estate a good inflation hedge.