2020 is still very much with us, as surreal as the year has been so far, and it is important to stay even more focused on your year 2020 property investment goals in the face of recent global challenges. Continue ahead and arm yourself with market information to enable you to make intelligent property investment decisions in this time of opportunity. For the investor who is looking to increase his real estate portfolio there are some things to bear in mind when investing in real estate:
It’s not an emotional decision. True, buying property is often an emotional decision for some, especially in the residential real estate market. However, for the investor looking to increase the value of his portfolio, it is usually a business decision devoid of emotional trappings, except of course the love of wealth, and perhaps, self-actualisation. So, she does not buy property just because the kitchen is the loveliest shade of peach or because she is trying to keep up with the Joneses or whatever else. The decision is usually made after careful analysis both of the market and the fit of that particular property within her portfolio.
Timing. At the risk of sounding terribly pedestrian, it is wiser to buy when prices are low and to sell when prices are high. This is hardly rocket science but for some reason, just as it is in the stock market, people will sometimes resist making investments when the market is bearish, until they are sure that the market is about to turn positively, and usually, by then prices have already started to rise. The reasoning behind this is often that waiting until the very last moment before prices rise will enable you to hedge against purchasing in a continually sliding market and suffering a further drop in prices. This thinking is flawed and reactionary. It is true that without a crystal ball, it’s not always possible to tell exactly when the market will turn either way, but there are trends to watch out for. Additionally, if you can determine that all things considered, the price offered for a property is a fair price with the potential to appreciate, that should be the determining factor in deciding whether to purchase at that time. Should you find yourself in a slow market and prices continue to drop you may lose value temporarily but if you have bought ‘’well” you should enjoy significant appreciation in the mid to long term. The higher the risk, the higher the returns all things considered and if you can take a very well calculated risk when everyone else is twiddling their thumbs, you should enjoy higher returns as well.
Trends: It may seem like some people just intuitively know when to buy and when to sell their property. They have probably been at this for so long, that it may appear to the uninitiated that they instinctively know when to sell and when to buy, but the truth is, there is no mumbo jumbo to this. That ‘’intuition’’ is a result of experience and consciously keeping track of changes in the market. It is important to keep your eye on the market to see what trends are being established. This is the only way in which to attempt to forecast the future. If everybody is building high-rise apartments, it would auger you well to carefully analyse current and future supply and demand of that product especially since the supply of property is not elastic and cannot very quickly respond to immediate changes in demand.
Long term or short term outlook. You also need to carefully consider what your investment goals are and the time frame within which to actualise them. We tend to favour the short term over the long term in these parts and that is quite understandable in a society such as ours where planning seems to be abhorred and long term credit is not forthcoming. With high interest rates trailing us, we want to purchase property in January and sell it in December, with huge margins. Investing in property tends to require a more long term perspective to enjoy capital appreciation. In the short term, you can also earn passive income from the rent that you receive from your property.
Diversify your portfolio: As with other assets, you should diversify your property portfolio to hedge against risk and achieve a greater aggregate value on your assets. You might consider including a mix of commercial and residential property, as well as geographically diversify your property mix. You could also diversify by buying property with different ‘maturity periods’ in the sense that one property may be in a relatively undeveloped area with potential for future growth and development say in the next 8-10years, while another may be in an already developed area with the potential to immediately begin to generate income. Another way of creating a diversified portfolio without necessarily going out and buying up a whole range of real estate is by investing in REITs (Real estate Investment Trusts).
Add value: Seek whatever value is not necessarily visible to the unadventurous and make it happen. Do not ignore that dilapidated property without tweaking your vision a bit to discover whether you can turn it into the Taj mahal. It’s not impossible.
Do your research about the market or area in which you wish to invest and get quality advice. Always bear in mind though, that history tends to repeat itself as do investment cycles, and if you are prepared you will appear to intuitively know the script ahead of others.