The Basics of Investing in Property for a High Return On Investment (ROI) – This discussion applies just as much as to buying (and selling) a home as it does to more general property investment in the true sense of the word… ie investing in property as an investment strategy outside of the investment in a home.
The most important point in my view is to realize that an estate agent is not the ideal person to advise on property investing since the agent is geared to making a once off sale under the best terms possible in order to maximise commission earned. In general the estate agent has the interests of the seller at heart anyway.
When new and attractive property investments become known to the general public it is often too late to make the highest possible return on your investment (ROI).
This means intelligence gathering is paramount for the astute property investor.
The best source of information are as follows:
- Find and cultivate relationships with truly professional property brokers whose mission in life is to track all forms of property opportunities
- Become determined to educate yourself in the whys and wherefores of property investing so that you can also access the same intelligence and marketing information available to brokers.
- A combination of both. By far the better route to go. When investing in property it is unwise to abdicate important decisions to 3rd parties without gaining knowledge for yourself.
Don’t expect to make a decision to start investing in property today and for everything to become crystal clear overnight.
You will need to apply yourself to learning the intricacies of property investment.
Fortunately good time-tested advice is available online and through special books which are generally immediately available by download at a cost which pales into insignificance compared to their value.
In buying books it’s important make sure that the information is not just that… ie information.
The contents of the book must allow practical implementation of tips, techniques and systems.
Since calculations and forecasting models are the essence of successful investing the best books will provide useful working models (eg in Excel) to take the pain out of complex forecasting calculations.
Be careful of books or subscriptions that offer the earth and are essentially “fluffy” self serving publications aimed at persuading the reader to buy something else more valuable.
On the internet this approach is common.
Make sure that in buying expert information online that the seller offers a no quibble money-back guarantee.
In this way you can be fairly sure the content you’re buying has real value.
Look for testimonials from 3rd parties as a means to making more informed decisions on what to buy.
Property is such a good investment for the ordinary person because high value assets can be purchased using capital from other sources than your own… referred to as gearing.
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Not only that the investment can be sued to generate cash flow through renting for example which in the early years may not be enough to cover bond payments but over-time rental income exceeds actual costs of holding the property.
Valuable positive cash flows then become available for further geared investments.
Gearing can also be a curse unless properly understood and allowed for.
In terms of property investing gearing can be safely used when properties are invested in that are
- In good areas
- Can generate good secure rental returns based upon accurate and detailed calculations forecasting future cash flows with the best information available
- Represent true value (determined by analysing available data for similar properties in the area)
- The investment can be carried for a reasonable amount of time if circumstances require this.
- You are not stretching your own cash flow in such a way that you can’t service the bond repayments. This can be disastrous