Property Investment?

Property Investment

Investment and property are two words that are put together far too often! I rarely offer “investment properties” because I am generally cynical about anything sold this way. Normally an “investment” is something that no one wants, so the only way to sell it is buy saying it is cheap and will go up in value or will produce an income!

Any purchase of property must inevitably have an investment element to it because no matter how cheap, it is a big ticket item! It takes a lot of hours work to buy the cheapest property and for anyone making this commitment there has to be a belief that the asset will at least retain its value.

During the boom there was a huge amount of misselling and misinformation out there. Property was being sold as a commodity rather than as a usable product. People were urged to buy on the promise that they could make a profit on a property just as they would by investing on the stock exchange, buying gold coins or putting their money into a bank savings account. We were constantly told that prices here, there and everywhere were rising by 20% pa. Why? Who was buying and why were they buying? If it was because people needed a home or wanted somewhere for their own holidays all well and good. Too often however this promise of market appreciation was no more than a way of selling people something they didn’t want! A typical example could have been the person who wanted a Costa del Sol villa. He can’t afford it so a clever salesman suggests he buys 5 off plan apartments in Bulgaria (properties he doesn’t want and will never use in a country he has no interest in). He is told that they will appreciate 20% pa and in 2 years he can sell them and buy the villa he wanted in the first place. Neat! Believable if you listen to the media hype! The reality is that a lot of people got their fingers burned.

So what makes a good property investment? Here are some questions that might help

1.      Who is the End User? Who wants to live in this property? If I wouldn’t live or holiday there, why should anyone else?

2.      Is there underlying value? Is it in an area people want to live? If it is then it will rent well and the underlying capital value will be safe. If the area is bad then so is the investment.

3.      Is the promised return on investment realistic? If it seems to be too good to be true it probably is. High returns usually mean high risks and just because you can’t see the risks it doesn’t mean they don’t exist. I have seen great returns offered in Detroit, USA for example but some easy research says that these are not good investments.

4.      Why are they selling to foreigners? If an investment is good surely the locals would be at the front of the queue to get a piece of the action?

5.      How will I manage my investment. Lots of people will sell me a property but how many will stick around after to make sure it is let.

Answer those questions and you will have a pretty good idea whether you are on safe ground or stepping off a precipice!

This is a starter on the subject of property investment and I will aim to cover some of the tricks of the trade in coming weeks.

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Email: bill.tickle@tickle-international-property.com