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Investing in propertyInvesting in property has produced the majority of the world’s richest people. Some millionaires just got there simply by owning their homes. Buying a house or apartment can be the best wealth creation decision you ever make, if you make it wisely. Timing. Its not always the best time for investing in property. Like in many other investments, the best time to buy is when the prices are going down. This could be because of increasing interest rates, attractiveness of other investments, stressed economy, etc. Most often in economics, what goes down will go up.
When prices go up, one can consider selling. However, high prices could mean high rental collections too. Most people would opt to rent because they cant afford to buy and high demand is good for business of a "buy to let" owner.
Location. Its been stated over and over again that location is the buzz word in this sector. An old rule of, “getting a bad house in a great area than a great house in the bad area” applies. This happens when you look at your home as an investment, rather than a place to stay in.
Invest in an area that has convenience in terms of school, shopping, work, play, etc. this ensures that you get a buyer faster when you want to sell. Your home should appreciate in value at a good rate, and this is determined mainly by location.
Investing in property by buying in the top end market is usually not the best move. You may look at the “not so” areas which have high growth prospects. Estate agents and other property experts can help you identify these areas.
Speculation. At some stage in my life, my financial advisor was a speculator. He was buying and staying in a house for not more than 16 months, sell and move to the next. I can’t imagine the stress of relocating every year or so. It seemed to be working for him and he had all the time to play golf and attend his photography lessons.
A property speculator does not hold onto his investment. He buys and sells as quickly as he can to make quick profits. You need some skills to make it as a speculator. Your full-time job is to search for bargains, maybe dilapidated apartments, desperate sellers, etc to make that profit, that fast.
Long-term Investor. This group holds on to its investment for a decade or so and sell after it has achieved maximum growth. This is less risky compared to the previous group. Your investment goes through the whole cycle of growth and plateau and most probably decline. But it usually yields more returns in the form of rental returns or sale profits. Buying vs Building or Renovating. Another decision to be carefully considered is whether one buys or builds. House construction can be quite stressful and draining physically and emotionally. One has to be emotionally ready to deal with constructors, suppliers and everyone else in between.
On the other hand buying could mean you get something less than your ideal. You may sacrifice a few small details or even major structural features. This is the reason most people who can, choose to build their own homes.
Buying in Auctions. This is another source of bargains. Properties are usually under-priced in auctions. Again, one needs a skill to get good deals in auctions. You need to properly evaluate the house prior the auction.
The truth about investing in property is that, it is not always wise to buy. Sometimes its just a bad time to buy and one would rather wait until the prices go down and it makes sense to buy. If prices are unreasonably high, they’ll go down after your purchase. If you can’t afford to buy, don’t. You don’t want your home repossessed by the bank.
You may actually save a lot by renting and investing the rest of your money in other high return forms of investment.
From investing in property to healthy finances
Work for yourself (opens in new window)
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