THERE ARE AT LEAST THREE REASONS WHY I BELIEVE PROPERTY IS STILL THE BEST INVESTMENT FOR YOU
This Blog Post is not meant to establish who is right and who is wrong about the pros and the cons of Property Investments versus what I like to call Paper Investments, i.e. investments in instruments like Shares, ETF’s and Listed Funds.
The purpose of this Blog Post is to give you an alternative and additional view that is rarely shared with the Public because the big Financial Institutions make a lot more money out of you by selling you various complex financial products and solutions than by lending you money on a home loan.
REASON 1- FINANCIAL LEVERAGE
What other investments will you be able to access by borrowing 80%-90%-100% of the Purchase Price? Simply answer is NONE.
The simple reason you can do that is that Lending institutions know very well that Property Investments is the safest, most durable, and proven investment in the history of mankind.
Financial Leverage is a Growth Booster for your Return on Investment, and that’s one secret your Financial Planners don’t want you to know
Have you tried to go to a Financial Institution to try and raise money for your new exciting business venture? You might have the best business plan in the world, but it is highly likely, if not certain, that the bank will not advance you any money and politely tell you to come back in 3 years’ time once the business has a track record of profit. Not very useful, right? But if you might be able to raise finance for your new business venture by simply asking for a re-advance on one of your existing property investments and using such cash to start your new business. There we go, you have become your own bank!
YOU CAN BUY IT AT A DISCOUNT
The price of listed shares and investments is dictated by highly liquid and transparent markets where “the price is the price”. On the contrary, the property market still is a partially liquid and transparent one where it is totally possible to purchase at a significant discount to genuine market value. You might have local information or the Seller might be financially distressed or in the need to urgently sell the property; this is likely to result in a 10-30% discount to market value.
It is critical that we remember at all times that the secret of Property Investing is that “You Make your Money when you Buy”; we shouldn’t rely on the tide of the market to simply “lift all boats”. When we buy 20-30% below market value we have already made our money, then it is simply a matter of deciding how and when you want to “cash-in” on the profit you have generated, and there are many ways to do this.
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YOU CAN ADD VALUE TO YOUR INVESTMENT
Once you have bought Shares or a Listed Fund on any of the various Stock Exchanges all you can do is sit and hope Management does a great job and there is no financial crisis to hit your returns. You have little to no control other than selling your investment if you have changed your mind or do not feel comfortable with the results and the disclosures.
On the contrary, with Direct Property Investments where you own and/or control the physical asset, you often have many strategies you can adopt to increase its value;
Examples of value-adding strategies are numerous but include actions such as:
- Buy a house in bad conditions/needing repairs in a good area with good demand; buy at a discounted price, do focused renovations and either sell or re-finance for a profit
- Do short-term letting on platforms like Airbnb
- Add additional rooms and outbuildings to rent out and turn the property into a multi-let house. Just make sure that you comply at all times with Building Plans and Local Authorities by-laws
- Apply for re-zoning and sell to a Developer
Personally I am not much of a fan of refurbishments or building, simply because I do not have the skills (and most importantly the passion and the patience) for doing this; but I know of many people that do so and very profitably so. Renovations, extensions, and refurbishments are great opportunities to put your creativity, imagination, and skills to great profitable use. Be on the lookout for the “worst property in the best neighborhood” as such strategy has served many investors very well in the past; you do not need to “re-invent the wheel”. Research and adopt investments strategies that have worked consistently and predictably in the past for other people; then adopt them yourself, possibly with your own personal “twist”
Hopefully, this Blog Post has provided you with a fresh perspective and “food for thought”. Decide for yourself.
I Believe in the Power of Property Investing!
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