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Does Property Investment Bend Towards Luck Or Knowledge?

luck in property investmentDo you equate buying a property with investing in a property? I wish for your good that you don’t. While anyone can be a property buyer, not many can claim to be an investor. Why? It is because each investment has profit as its chief objective and if it were so easy to make profit, we would all have ‘Buffet’ as our Surname.

Can it all be this easy: you buy a property in your name and then wait for history to help your cause? After all, your argument is “I bought it in a historically successful location.”

May be you are lobbying for its tendency towards high capital growth or perhaps you are driving high on the multiple-industry factor- “Hey! My property location exhibits diverse factors of growth, the area will never see a property cycle trough”. Ever thought why do we call it a ‘cycle’?

I have heard all this before but let me propose a one-sentence counterargument: “Little knowledge is a dangerous thing.”

Lack of property-centric knowledge can be really dangerous

Most of us make this mistake. We assume that our little knowledge of the market will at least help us enter it and then we hope against hope that luck will see us through. Listen up guys! If this theory did not help us in our exams, how will it help us in real-life situations?

Luck element has near-zero relevance

Investing successfully in properties has nothing to do with luck. It is pure strategy and the luck element is only there till the degree it is there for any of life’s endeavours.

Knowledge is your only guard

There is just so much to learn. Whenever I have been asked “How can I grip the market?” I have found myself short on answers. I have felt the same conundrum when others have asked me “Tell me something about yourself?”. It is not that I don’t know the market, far from it, I take great pride in what I have learnt over the years.

It’s just that how can you ever summarise life’s learning in a few sentences? Still, let me try. I say again, investing in property is a knowledge-centric activity.

Understanding market turns/property cycles

You have got to know the market in and out. You should be able to anticipate upturns and downturns reasonably well. While it is recommended to invest in historically successful areas, you should be able to take the counter-cyclical gamble from time to time. I have myself benefited in the past by buying properties in areas which haven’t done too well for a long time (law of averages).

Rental yield/propensity for growth

You should know all about the rental yield of the prospective area. Find out how the council sees that area, if it is on the ‘growth flank’- a place might show great promise towards its eastern flank but be in Doldrums on the western side.

Handling distressed properties

Find out in detail about the distressed properties, the Foreclosure or the Short Sale ones. A good investor must also have his heart in the right place. Remember, your profit vehicle may just be a lifetime’s dream (lost in mortgage defaults) for someone else. The least you can do is be empathetic.

As I said, it is really difficult to summarise the ‘strategy’ or the ‘knowledge’ bit here but I can say for sure that it’s not your game if you are giving luck factor more than its due.

Do you think luck can hold you all the way in property investments?