Buying An Investment Property - Four Major Guides Or Perhaps Rules Real Estate Investment: address it like a Business... When purchasing an investment property, treat the purchase in the same fashion you'd probably if you were purchasing a business later on. Look at it holistically, examining just about all quantitative and qualitative aspects of it's financial position, purchase price and management. Failure to examine your properties balance sheet and its particular current management could have dreadful consequences. Few if virtually any residential property investors take the time to execute this critical examination and instead let their emotions and pot luck shape their buying strategies usually when these investors are usually asked why, they reply with comments such as: 1. Property increases in value over time so I was investigating capital gain, 2. I became told to hold [by your marketers] the property for ten plus years so it did not matter if I initially paid too much for it as time fixes all, 3. I became told that I would find large tax benefits therefore the high price and poor cash flow did not matter just as much , as I could claim it as losses on my levy , 4. I trusted your marketer that sold myself the property, as they promised a rental guarantee, STOP would you obtain a business and keep utilizing the losses? How long do you think you'd probably stay in business? Stick towards the fundamental disciplines of purchase , once you have learned and practiced the disciplines your investing will move from unsure ground on to a solid footing and never again will you fall for the hype and implausible stories of seminar presenters or marketers who benefit from your ignorance. I will handle four major guides on this issue and the disciplines last option in subsequent articles, right now to get you started. Guide (1 ) Switch off the Real Estate industry , Guide (2) don't worry about interest rates or the economic climate , Guide (3) obtain a business NOT a property, Guide (4) Manage your stock portfolio of businesses. Let us right now look at the first of these books : Guide 1. SWITCH in the REAL ESTATE MARKET The real estate market will be driven by hysteria and emotion. It is some exactly what like a manic depressive!! at one moment it can be delighted about falling interest rates and future prospects one minute and unreasonably depressed at the possibility of rising interest rates, your economy or numerous variables the next. During the time of wild excitement , gurus pop out of woodworking telling you how they became a huge success from negative geared house investment, or how to multiple the value of your investment house in three years. They in no way , however, offer any evidence or some workable formulations. The minutes unreasonable depressions sets in, these gurus scamper back into the woodwork, to never be heard from again until eventually the next swing...sound familiar?
Fortunately for the sophisticated investor, this particular behavior creates opportunities, specially when overpriced negative geared properties take their toll for the finances of the ignorant entrepreneur. The smart investor has now properties available at irrationally affordable prices. Just as you would not take advice from an advisor that displayed manic depressive tendencies, nor should you allow the real estate market for you to dictate your actions. The real estate industry merely exists to assist you while using mechanics of buying and marketing properties. If you have done your homework, understand the property company and are confident that you know more to do with your business than the real estate market does , then turn off the real estate industry. You will be surprised at just how well you do, in acquiring well priced properties, without being influenced by the market. Pretty soon you will be persuaded at how well your investment health has lasted , despite your inattention towards the market. The only time you'd probably allow attention to the market would be to ask "Has anybody accomplished anything stupid that will allow myself an outstanding opportunity to buy a wonderful property at a marvelous cost ?" Guide 2: Don't worry concerning the interest rates or the economy: How often have you heard men and women whining about government coverage ,the building industry, rising rates ,taxation and how many financial institution foreclosures are occurring? how often have you found your self speaking about and debating whether the economic climate is poised for expansion or slipping toward a new recession, whether interest rates are usually moving up or down, as well as whether there is inflation as well as deflation? Have you ever done anything at all about it? Can you influence as well as change government policy as well as control inflation? stop Give yourself a break. Stop wasting your time and energy analysing your economy OR assuming where or what the economy will be , thus hoping and praying to buy property to fit efficiently into that grand premiss. This in my opinion is irrational thinking. For these relevant reasons. First: NO one has ECONOMIC PREDICTIVE POWERS and Second: If you buy your purchase to suit a particular economic environment, you may be destined for massive failure. Time is more wisely spent, finding and owning investment properties wisely and profitably, bought with the ability to profit in any economic environment rather than buying property subsequent some self designated master who has their own agenda. Guide 3:Buy a business not really a property Before you start arguing that the property is not a business, stop. An investment property is a business and must be treated as such. After you have got your mind around handling your investment property like a company and that you have decided to invest in this business , once this decision is made it cannot and should not be improved. Further more you have to hold and run this investment like a business using all the disciplines required for the profitable working and management of a company.Ultimately the wealth created from this business ownership can support you in your retirement. Now what will you be thinking of prior to investing in this business. Without a doubt your mind will be
racing along with stacks of questions, to begin with creating massive confusion. However if I were given the same scenario I would methodically begin with building a list of all the things that I would need to discover about the business, these are generally what I call the business disciplines and I will cover them last option in my next issue as well as alternatively you can enroll in my own course.Ther are a number of major fundamental disciplines. Guide 4: Manage your stock portfolio Of Businesses (Property) Now that you're a "(Property) business owner " rather than a "Know nothing Investor" and "BANK ASSET", you no longer determine your success by annual cost changes or capital gains. You have the ability to select the very best opportunities around as they grow to be available. Your goal as a house business owner is to create a stock portfolio of properties (businesses) which will produce the highest level of profits over the next ten years, due to the fact 'earnings' NOT 'Price Changes' now becomes your greatest priority. Several things have now improved : Firstly: Your thinking offers changed Secondly: You are less likely to trade , Thirdly: You are less likely to get influenced by the numerous gurus peddling secrets Fourthly: You are not as likely to buy marginal investments. Now that you are managing a portfolio involving property business, not only will you steer clear of selling, you will only pick fresh property businesses for purchase along with much greater care and adherence to the business disciplines. You will resist the temptation to buy properties that do not have a profitable stability sheet (net rental place ), you will start accumulating and growing large cash reserves. If the property business does not pass the test DO not really PURCHASE IT no matter your location DO NOT LET by yourself TAKE IRRATIONAL RISKS and turn into a lemming again Renegade Millionaire Recession Proof Business