15 Unfortunate Truths About Property Investing
Navigating the Landscape: Insights for the Aspiring Real Estate Mogul
You may be amazed by how some people were able to make it big just by investing in properties and thought to yourself, "Hey, it's probably just easy!" The truth is, it's not - investing in property is complicated but simple at the same time.
How did that happen? It isn't straightforward in the sense that if you only do what other investors are doing, then the outcome may not be suitable for you. However, if you take the time to study and understand how you can adequately invest in properties, you will realise that it is all just straightforward, and all you need is an excellent strategy to make it out there.
To help you get started, we will be sharing with you the 15 unfortunate truths about real estate investing for you to gain a deeper insight as to how you can get into this business without having to suffer huge losses, just like those who immediately jumped the bandwagon without understanding it first did.
1. Property markets undergo cycles.
The first thing you must mind is that property markets go through cycles. It means that the value of a well-located property can increase over time - sometimes even doubling every 10 to 12 years! However, there are also times when every cycle, the value of a property remains stagnant for several years and even decreases a little for short periods.
Don't panic when this happens, and understand that this is a part of the cycle.
2. Being a "countercyclical" investor is not as easy as it looks.
Are you familiar with the term "It's easier said than done?" Well, the same applies to property investing. It is straightforward to say, "I'll be fearful when others are greedy, and greedy when others are fearful," but quite often to follow through, especially when the market is at an all-time high, and when there are various opportunities surrounding investors during market downturns.
3. The property market is unpredictable in the short term.
Fundamentals have driven markets for a long time, but human emotions and crowd psychology can change even the best forecasts in the short term. Of course, there are also the "X factors," or those unknown factors that come out of the blue and surprises investors. Sometimes, these X factors are on the upside, but they are on the downside most of the time.
Of course, world events like COVID-19 are not included in these X factors as this is a once-in-a-lifetime event. We are talking about world events that are bound to happen at least every ten years or so.
4. Real estate is a game of finance.
Since property investing is a finance game with a few assets thrown in the middle, property investors must come up with a strategy and buy themselves time in the market by placing financial buffers to help see them through during the ups and downs of each property cycle.
5. Property investment is not as "exciting" as it sounds.
Yes, property investment is meant to be boring. It isn't like what we see in the movies, where everyone is always very excited and celebrating their "success" in the market. A piece of advice: make your investment boring so that the rest of your life can be exciting.
6. Most of the market news is "useless."
As a property investor, you always must keep your eyes on the prize and avoid being distracted by baseless news. Most market news isn't just useless but is also harmful to an investor's financial health. Be careful.
7. Choose who you listen to.
Focus less attention on those who keep on bragging about their "success" and focus on those who share about their mistakes so that you would know what you should avoid once you step foot into real property investing.
8. Avoid listening to "hot spot predictions."
Some are self-proclaimed "gurus" who share their market predictions, end up being wrong about it, but still draw large crowds who want to listen to their next "market prediction." Do not be one of those people - do your research.
9. Do not be swayed by "promises."
The more "comfortable" and "easy" salespeople make investing in property sound, the more you must be careful. Avoid rental guarantees or readily believe in promises of specific returns. Remember, property investment is long-term, and it is less likely for you to gain something from it in a short period.
10. There is no "secret" in property investing.
What separates the successful property investors from the rest is not their "investment secrets" but their mindset. They know when and how to execute their strategies, and they do not listen to the crowd. If you want to be just as successful, you must devise an effective strategy instead of waiting for considerable investors to divulge their "secrets."
11. Settle your debts first.
If you currently have credit card debts to pay, settle them first before investing your money in properties. You must be financially stable instead before taking on this vast journey to property investing. If not, the debt you will incur on buying your first property will surely overwhelm you.
12. Don't try to gain cash flow in exchange for buying real estate.
Residential properties are high-growth but low-yield investments, so do not invest in real estate for cash flow. Remember that capital growth is what will bring you out of the rat race.
13. Know the three stages of property investment.
First, you must go through the asset accumulation stage, which would require you to leverage and own high-growth properties. Then, you must slowly reduce your loan-to-value ratio. Finally, you can start to live off your "cash-generating" properties.
14. Don't be afraid to go big.
Think about how many properties you will need to provide cash flow for when your retirement age comes. Now, double that number.
15. Most investors need 30 years to be financially independent.
On average, an investor needs at least 30 years to become economically independent through property investing. Most investors go through the first ten years making mistakes and learning what they should and shouldn't do.
You will then use the next few years to sell underperforming assets and sort out their financial house. After 2 to 3 good property cycles, they become wealthy through their property investments.
Of course, you can still cut your way through these long years by studying the market very carefully and asking for expert help right at the beginning of your investing journey.