Stock Market Lessons You Can Apply to Real Estate Investing

Real estate investing is just like normal investing.

It’s a different asset class but the principles of success remain largely the same.

Become a market maker

Hedge fund short squeezes have been dominating recent media because their position sizes are large enough to move the market. Retail investors have learned how to work together to combat shorting positions held by these big players. The point is that at a certain size, hedge funds move the market. The same can be implemented in real estate. the largest players have a niche they focus on and become a major player in that market. For real estate, that can be purchasing multiple properties in close proximity to one another or growing a portfolio of a single asset type.

Grow a critical mass

Position sizing is one of the least discussed but most impactful levers in growing a portfolio. For equity markets, it pays to be right if your position moves in the direction you think. But it pays even more if you have a large enough position in the security where that action significantly grows your account size.

In real estate investing we refer to this as economies of scale. The more properties you own the less expensive it is to service each one. A critical mass is like a tipping point in investing, beyond that point, each additional investment adds to the efficiency of your overall portfolio.

Focus on value Investing

The great investors Benjamin Graham, Warren Buffet and others have popularized the concept of value investing. The idea is to purchase quality assets for less than their intrinsic value. A small capital outlay that is well placed will generate more revenue per dollar than you can get anywhere else.

The same is true in the real estate world. Buying properties for less than they are worth is a solid strategy to grow a sizeable and profitable portfolio.

Successful investing is a matter of consistently making sound decisions, regardless of the asset class.