How To Condition Your Mind For Success With Real Estate Investment

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Those familiar with stock market investment are only too well aware of the biggest drivers behind the market – FEAR and GREED. During the bear markets fear prevails – stocks are ditched even though they may have sound fundamentals. People are scared. Fear makes them sell. Fear moves the market downwards.

In a bull market it is quite the opposite. Those who invested in the dot com craze at the turn of the century will know all about that. Stocks that had very little by way of assets (or at times even a sound business plan) soared high just because they were internet based – and people thought the internet was the future. Greed took over as the crowd pumped money into stocks without stopping to think about the basic fundamentals of the P/L and balance sheet.

The very same principals apply in property purchasing. While the property market is not quite as liquid or mobile as the stock market there are always periods of property booms and slumps. As an investor you need to be aware of this and your gameplan should be clear – are you in to time the market & just enjoy the booms (a strategy that takes quite a lot of skill) or will you ride out the bad times in favour of long term capital appreciation. 

Creating Your Own Team Of Real Estate Experts

If you plan or creating a portfolio of property investments then you should think about setting up your own team of professionals to help you get the best out of your available resources. This does not have to be as expensive as it sounds – it only means having reliable contacts in fields such as accounting, tax and, of course, real estate. Over time having the right contacts may save you tens of thousands by making your property investments more tax efficient – using help from the right experts can also enable you to purchase property that performs better financially over time.

Identifying Global Trends In The Real Estate Marketplace

The world is an incredibly large place just humming with opportunity. One of the best ways to spot global opportunities is by identifying trends and developments on a macro-economic level.

If you can spot emerging opportunities before they happen you may be able to get into a property boom right from the ground floor.

How can you do this? By being aware. Keep yourself well informed of global economic developments. Try and spot potential opportunities by trying to read how a particular development may affect properties in a region.

Let’s look at an example.

India has seen a surge in IT investment in recent times. Famous IT companies including Microsoft have invested time and money in building their presence in India. Bangalore has been emerging as a hub for these companies. This is an example of an opportunity identified through spotting a global trend. Many of these companies will invest in property (either to purchase or lease) to accommodate staff.

How might this effect the property prices in Bangalore? What would happen if (as predicted) IT investment in the city is set to keep increasing? Could it be that mini-towns would be set-up to house the staff that work for these companies?

Another example of a global development affecting property prices is the acceptance of Bulgaria into the EU. This, coupled with the emergence of cheap airlines starting to operate from various European cities into Bulgaria has had a dramatic effect on the Bulgarian housing market. Tourist activity has also seen a rise – these macro economic factors filter down and have a tangible effect on the property market. During this time, it has not been uncommon to find capital appreciation of 40% and more for Bulgarian properties.

This is a powerful strategy  for identifying the potential global property hotspots of tomorrow.

Purchasing Off Plan Real Estate – A Surefire Winner?

The sophisticated property investor has one very clever trick up their sleeve. It is to carefully choose the time & location of their property purchase and buy it OFF PLAN.

Here is an overview of the technique:

· The deposit for the off plan property is made at the planning stage (construction has not even begun at this point).

· While the property is constructed the investor sits idol – a few months prior to full completion the price for the property will start to rise. The investor then flips it for a nice profit without actually doing anything at all. 

It sounds fantastic, and indeed It has worked very well in certain situations (for example during the property booms experienced in Bulgaria and Spain) but there are also certain pitfalls that the off plan investor must be wary of: 

· It is vital to get the time and location right when using this technique. For example, during some property cycles new housing developments are built in droves and this can lead to a glut of new properties on the market. For those intending to flip the property this scenario could be a real problem.

· Some developers will use the flipping technique to entice potential investors to buy their properties. The problem is that if a large development has many investors that have purchased a property each, and all are looking to flip them on completion then it is likely that some of these will not be sold in time.

· Check the contract carefully to ensure that flipping is allowed without any penalty (or that a percentage commission is not payable to the developer on resale).

· It’s important to manage the risk that the flip may not be successful in the time period desired. If the property does not sell just prior to completion then the investor must ensure they have the required capital to complete the purchase and any additional expenses that may be incurred.   

Of course this does not mean that you should think that buying off plan will lead you to a disaster. The trick is in having your finger on the property market pulse. Knowing what markets have strong fundamental demand for housing is the key – and then ensure that your off plan purchase can be flipped comfortably without penalty.

Remember the old saying, LOCATION LOCATION LOCATION? It is as important to off plan buying as it is for your own home purchase or any other property investment. This means carefully choosing the right country, a prosperous region and a quality development. Try and get a feel for the current level of demand for the type of property and area that you’re looking to invest in. This is a key factor – without suitable demand you could have a torrid time trying to sell your off plan property.

Also, research the company that is offering the development for sale. Is it reputable? What have it’s customers said about it in the past? The shrewd investor may also wish to pick up a financial prospectus and check for financial stability (or ask their accountant to do so).

In conclusion, investing in off plan property certainly has the potential to pay off. When it works, the investor parlays a significantly small percentage of money, yet walks off with the capital appreciation on the entire value of the property.