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Whenever I get asked by anyone how to invest in property, I respond with a series of questions:
o What are your financial aims? In other words what are you after? Are you seeking an income, capital or both?
There is a big difference between wanting to retire in 2 years so you can live off your investment income and wanting to help your children with tuition expenses in 12 years.
o Will you need to borrow money and how much risk are you willing to take?
o Will you consider investing overseas, and if so, where will you invest – Europe, the Far East or the Middle East Overseas property investment.
o What level of risk are you willing to take?
o What happens if you need your money back quickly?
Remember, liquidity is a major problem in property investment. If you invest in the stocks and share market, you can pick up the phone and sell in minutes. That’s liquity. Just try doing that with property and you’ll see that it’s a completely different story.
o What about your tax liability and what would happen if it all went wrong?
o Do you want to invest in commercial or residential? Do you even know the difference?
These are the type of questions you should be asking yourself before you dive in and invest in property. It’s very helpful to write down your reasons for wanting to invest in property. You can always revise your list if you change your mind about your investment motives. But I guarantee you won’t be sorry for spending a little time up front making the list. On the other hand, if you’re unable to come up with any motivating factors for investing, you’re also setting yourself up for failure.
This may seem like a lot of work, but it’s a crucial part of the process if you want to succeed. Remember: buying property BEGINS with a well thought out plan for your exit strategy!
You should also be aware of the intense marketing hype of many online estate agent sites; they often prey on gullible, uninformed individuals. Be careful not to fall for the hype regarding the off plan deals marketed in nearly every country. Media such as glossy overseas magazines that advertise second homes for sale as investments are often very misleading.
Another word of caution – don’t be fooled or conned by the promises of “get rich quick” property schemes. Property is a long-term investment. It’s easy to lose sight of this as you hear any number of different, new and possibly more exciting property investment strategies that appear to be making money NOW. Years ago you could purchase reasonably-priced property, rent it out and make good money in a relatively short period of time. However, times have changed and this is no longer the case.
Not all real estate agents will be upfront about this fact. Like many others, you may mistakenly assume that your real estate agent is determined to help you obtain the best possible return for your money. Unfortunately, this is often not the case. The main goal of real estate agents is to sell property – period. Do you think it is in their best interest to convince you to make long-term property investments? Definitely not!
Media resources can also hamper your property investment opportunities by writing bad or good reports about property investments that simply aren’t true. Property-related journalists are being paid to write, not to conduct research about the real estate market or lucrative investment opportunities.
Advertising is big business and journalists may be paid to write a scathing or glowing report about various overseas or local investments that is completely false. Hence, it’s best to ignore the majority of what you read in the magazines and conduct some solid market research on your own. After all, it’s your money so you want to invest it wisely!
Fortunately, there are some reliable resources available to help you learn about current trends in the property market. Start by consulting one of the following websites before you invest in any of your hard-earned cash:
Collierscre – One of the leading worldwide real estate consultancies
Knight Frank – Residential and commercial property professionals
The Royal Institution of Chartered Surveyors – Leading source of information relating to construction, the environment, property and land
Estates Gazette – Magazine offering detailed information about commercial property trends
Also be sure to talk to local real estate agents as well as some reliable rental management companies. They can discuss some of the more successful local invesment property strategies. Don’t forget about members of your local business community and shop owners in your community. They can prove to be invaluable sources of information when it comes to local property invesmtent.
If you establish clear investment targets, you can focus only on the relevant types of property. I don’t recommend choosing more than two property types if you’re an inexperienced property investor. Given the vast amount of possible investment properties, this small step can save you a lot of wasted hours.
You should also limit the cities you’re considering to one or two. You can then determine the best and worst investment areas of a specific city by analyzing various factors such as crime and employment statistics.
The bottom line is don’t rely on only the latest investment fads to determine where to invest your money. This can prove to be a very costly mistake, especially if you are new to property investment. Spend some time determining your motivating factors for investing, ask yourself several important questions and narrow your target area to one or two cities. These steps will greatly improve your chance of success. With a little planning and advice, you can develop a clear investment strategy and avoid the most common property investment mistake.