The best and the worst property investment advice

property investmentProperty investment is not easy. If someone claims it is easy, he is lying through his teeth and it might just be the worst property investment advice that he has to offer, says Michael Yardney for the Property Update.

Those who assume it to be easy do not go ahead a long way in the property market. About half of the investors sell off their stakes in less than 5 years and most of those who remain in the game never get past owning more than a couple of properties.

You need to follow the fundamentals

Yardney says that the word which should describe the real estate market is ‘Simple’. If you follow the fundamentals, you can create an expansive portfolio for yourself but the task is always cut out because of the discipline and hard work involved. Investors should ideally look for these 4 recommendations:

  • They must buy below the fundamental price levels for a given property
  • They must prefigure if the area has demonstrated a capital growth in the past over a long term.
  • They must look for a unique property
  • They must set their eyes on a property which can be easily renovated or home staged.

A great advice for newcomers

The best advice to offer a newbie is to suggest holding on to one’s borrowing capacity when the times are good. The property market is cyclical and if there are good times, bad ones will knock on the doors too. In such times, you can tide over the crisis if you have kept a part of your borrowing capacity unused. For building a gigantic portfolio, an investor must also dig deep and look into aspects like:

  • Seeing to asset protection
  • Seeking to get one-up on the taxation system
  • Facilitating means of ethical ownership
  • Procuring finance from the right sources

Create one property at a time

Yardney advises that the ideal way is to build one’s real estate base one property at a time; investing in a property with the capital gains fetched through the former and moving on in similar fashion till you have succeeded in buying many properties. You can read the original article here.

Sometimes it’s worth investing in historically unproductive property

What Yardney says makes perfect business sense and is definitely great property investment advice. However, I think that his suggestion of investing in a property that has showed historic capital growth needs to be reassessed. In my opinion, it is sometimes prudent to buy in those areas which have been historically sloppy. After all, sometimes the law of averages catches up with even the best of properties and similarly an unproductive land may suddenly become a bone of contention amongst buyers too. It can be worthwhile landing up on such properties because they are always available at prices below their intrinsic value.

Have you gained by investing in a historically unproductive area? If so, how? I invite your opinion.