There’s more property research available today than ever before.
Only a decade or two ago, most property investors had to dive in with very little statistical analysis to help them choose the best locations.
Things are much different now, but sometimes too much information can make an investment decision more difficult than it needs to be.
1. Buy at the bottom and sell at the top
Of course, the property markets move in cycles and the main cause behind these cycles is that we’re human and tend to share the general optimism or pessimism of others.
Warren Buffett has long been attributed to a quote that reads along the lines of:
Be fearful when others are greedy and be greedy when others are fearful.
Investors interpret this adage as buying at the bottom (when others are fearful) and selling at the top (when others are greedy).
But that’s not always the best property investment strategy.
I frequently meet investors who have missed out on a great opportunity because they were so consumed with timing the markets, they forgot to take the plunge and buy something.
Generally, these investors become obsessed with the idea of buying right at the bottom of a property cycle so they can secure a “bargain”.
While the stage of the property cycle should be considered when you are investing, it shouldn’t form the entire basis of your decision.
In my experience, strategic investors do well in any market cycle, because they understand that it’s time in the market that’s more important than trying to time the market.
2. Market timing mistake
Seasoned property investors buy investment-grade properties whenever the time is right for them in a location that suits their strategy.
It’s important to buy “investment grade” properties because this type of real estate is proven to do well in all market conditions compared to other properties.
Smart investors buy when they have built up enough equity in their portfolio to purchase another property.
While you wouldn’t want to buy in a market that is starting to fall drastically in price – say in a Central Queensland mining location, which isn’t where investment-grade properties are located anyway – the market cycle in most of our capital cities is less important if you’re committed to holding the property for the long-term.
And that is why time in the market is always more important than trying to time the market.
Too many investors try to time the market by looking for the “perfect time” to buy.
But it doesn’t exist and while they wait for a mythical moment in time, they may miss out on investment-grade properties that will grow in value while everyone else is sitting on their hands.
3. Make your profit when you buy
You make your money by purchasing the right property, not necessarily by buying a bargain which could be a secondary property.
This means buying investment-grade properties that you can add value to in the location that is at the appropriate point in the cycle compared to other locations.
This way you’re not waiting for the property cycle to do the heavy lifting, you are in essence, “manufacturing” your capital growth through value-added strategies.
Right Choices To Make
We have already learned about some of the mistakes that one can make while buying or investing in properties. But there is a flip side of the discussion as well. And the flipside is about making the right choice.
This section will help you with that side of the discussion. In this section, we have listed some of the good practices that you can use when buying or investing in a property.
With that note, let us dive right in and look at some of the best practices that you can engage in while investing in properties.
Determining Rate Of Affordability
The foremost right choice that you can make is to assess and understand your affordability. A person without this crucial piece of information is bound to make some bad decisions. Therefore, the first thing that you need to do is understand your affordability.
Sit with your financier and look at your financial condition. Assess the areas where you can stretch and the areas that are critical. This would genuinely enable you to make the right financial investment decision. This is the first step towards being an intelligent investor.
Never Rush
The second most important thing that you need to remember and know is to be patient. Being a real estate investor is a challenging task by any means. In fact, it is one of the most time-consuming and taxing things that you can do. Therefore, you need to have a lot of patience.
Take your time and do the necessary market research. Otherwise, you will need help to make the right decision. Start by assessing the different aspects of your desired property, such as location, price, etc.
Choosing The Right Location
Research is one of the most critical and essential aspects to consider. And one of the most vital areas of study for property acquisition is the location. You can change everything about a property when you acquire it. However, you will never get the chance to change the very location.
As a result, you must be extra careful when it comes to choosing the correct location. The best way to assess an area is to create a small questionnaire. This would help you streamline the research process and will enable you to make decisions quickly.
Checking Out The Neighborhood
This sounds similar to choosing the correct location. However, it is a bit different. It is easier to assess a location. It can be done by evaluating different markers. However, considering a neighborhood is a little too complex.
This is more of a social assessment. Therefore, the best way to proceed is to sift through news bulletins pertaining to that area and go as far back as possible. Now, this sounds like a lot of unnecessary work, but it will pay off in the end.
Start Asking Questions ASAP
The final best practice is to assess and start asking questions. If you have a gripe, air it out. Nobody made the right choice by staying quiet. Therefore, you must not do that as well. Ask as many questions as possible. This would save you a lot of hassle.
Just as you assess a location, make a questionnaire to learn about the property. Learn as much as possible about the property, and you will know if buying the said property is the right choice or not.
The Final Thought
While, to some degree timing the market is important, it is not the key to investment success.
There’s a saying in property circles that goes:
When was the best time to buy a property? 20 years ago! When is the second best time – today?
In other words, you buy when you can afford to and when you are ready to.
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