What is the purpose of buying a property?
Although we may come up with many creative answers, there are only two reasons why anyone on earth would buy property.
- For one’s own use
- For investment
Not everyone who buys the property would want to buy for investment, and there’s nothing wrong with that. But if we are indeed one of those who intend to buy property for investment, then we would need to get a couple of things straightened out.
So, are you a property investor?
One thing we’ve got to understand is that if we want to call ourselves investors, then we should be after the returns, or what is referred to as ROI or return of investment.
This is such crucial because who enter the game with the intention of being an investor do not necessarily end up getting any worthwhile return on investment! Not everyone makes money from property investment.
It’s because not enough investors are even aware of this fact. Many thinks that property investment is a sure winner. But the cold hard truth is that fairy-tale endings are not assured but instead your investment could end up as a living nightmare.
Let us explore the returns that we can expect from property investment. There could be 10 or even 20 ways you can make money from property investment. But the reality is, there are only two ways we can make money from property investment.
- Cash flow or rental income
- Gains or capital appreciation
Importance of the two golden questions?
Golden Question No.1: Why are you buying the property?
Golden Question No.2: How do you intend to make money from property?
These questions may seem lame or simple, but these questions could make up the foundation of a great investor. Now how are the two questions so critical to the investor?
It all has to do with the selection process of what I call the IGA or Investment Grade Assets. Wouldn’t you agree that there are different selection criteria to consider when choosing a property either for one’s own use or for investment?
And let’s take it deeper one more level. Wouldn’t you agree that there are again different factors to consider when selecting a property either for yielding rental income or for capital appreciation?
Therefore, these two fundamental questions are critical before you even think about jumping into the game.
Two things to look out along the way
Here are property investment guide that you need to look out for while in the game.
- Risk and Rewards
- Entry and exit
- Risk and Rewards
The reason why many make bad property investment decisions is that they disregard the risks and are too taken up by the rewards.
Yes, it’s true that there are also people who overanalyze the risks and end up being paralyzed but the best investors investigate the risks and see if it is worth the rewards that they are offering.
- Entry and Exit
The reason why so many investors end up in bad investment decisions is that they do not consider the exit strategy and are only happy to be able to enter the game.
Many say that they will think of the exit plan later, but the reality of the property game is that you need to think two, three and maybe four steps ahead even before you enter!
The point is, do not enter the game if you do not see an exit strategy. Do not enter the game just because the entry is made easier for you.
Many people find themselves in bad deals because the entry was easy, and it temporarily made them forget about the exit. When the time comes, they are already in the game and simply cannot find the exit door and finally end up stuck with a money-sucking monster.
What I want to say is, before you decide to jump into the property investing game, you need to have a very clear set of objectives on why you want to invest in property.
This is because, a clear objective will lead to a clear plan and will result in greater return.
So, go prepare your objective, plan well and let’s investing!
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