A derivative is a financial instrument whose value depends on the values of other, more basic, underlying variables. They are generally used as tools for isolating and pricing financial risks involved with holding the underlying variable. Derivatives are not a completely novel concept in real estate investment. In fact, they are already widely used in the form of forward contracts, options on land, and interest rate swaps. The total return swap is the most prevalent structure for property derivatives. It involves one party paying the total return of an asset or index to another in exchange for a fixed‐ or floating‐rate payment. Property derivatives are based off of indexes that measure changes in real estate prices. Three useful strategies for applying property derivatives to real estate investment are hedging, asset allocation and rebalancing, and speculation.