Most people, at some point when considering building for their future, will consider investing in property and there are sensible reasons to invest in property, and then there are not so sensible reasons.
For example, right now we are experiencing the “bursting” element of that famous property bubble so if you’re choosing to get started in property investing at the moment, you must question whether you’re getting involved for the right reasons, or, with the right strategy. If you are considering property investing for the “right” reasons – and you know your risks – there is every chance that your property investment will be a profitable one.
In the current climate, it’s prudent to look at some of those “right reasons”.
1. Speculating or Investing
Land Banking, is SPECULATING, with the exception of buying land, with planning permission, specifically to build something. Investing in property to collect rent is INVESTING. Take a look at SPECULATORS who bought up dotcom stocks around 2000, and lost all their money when the underlying companies never did any business, and the SPECULATORS lost everything. Then take a look at INVESTORS who bought commercial property with high rental yields and collected the income whilst their assets rose in value. INVESTING is safer and smarter and it is vital to know the difference, although the odd speculative gamble here or there never hurts as long as the risk is calculated and acceptable.
2. “Property Values Will Always Rise – in the Long Term”
Don’t believe this dangerous myth! Over the last ten years property prices in Japan have fallen by nearly 60%. At present property markets the world over are suffering monthly losses in capital values. Expecting your property investing to go up in value is a mistake. Making sure you are buying with good value and ensuring your property investment makes sense from a positive-cash-flow perspective is essential in terms of knowing your risks, if you aren’t aware of these things then you are SPECULATING again. If the value of your property investment falls, you can sit it out and wait for a rebound as your cash flows are positive. You should consider any capital appreciation to be a happy bonus when it comes to speculative property investing.
3. Getting Started in Property Investing with Residential Property
It’s can be easier to understand, purchase, and manage than other types of property such as commercial. If you already own your own home then you have some experience of the purchase process etc. If you venture outside of your field of knowledge, take some advice.
4. Truthful Real Estate Investment Advice: Don’t Believe Everything You Hear or Read
Estate Agents have a vested interest in parting you with your capital. So they will generally give you the best bits, not the cold harsh reality. At David Garner Consulting we only ever recommend an investment to a client if we have made that investment ourselves, with our own money. And our property buying syndicate allows investors to take part in a bulk purchase along with other investors to help negotiate Below Market Value prices and other preferential terms. E.g. We will source a developer with completed houses he needs to sell, we will offer to buy 10 and negotiate a price between 15% to 20% below the valuation and ten members of the syndicate, including ourselves, will buy one, giving each individual the buying power of ten.
5. Where To Buy
Yes I know, location, location, location! And to an extent it’s true, but don’t forget that I have seen some stunning locations with over-priced, over-supplied property that won’t rent or resell for a profit. Remember the location does not mean you have to like it, I have bought and sold property in some horrible areas, but I’ve turned a healthy profit on each and every one.