If you look at the portfolios of some of the most successful people in the world, you invariably find something – property is the backbone of their wealth.
This fact isn’t by chance: it is by design. Property is the asset that keeps on giving, providing a steady stream of income for months, years, and decades. What’s more, it’s immune from inflation. If general costs go up, you just raise your selling price and increase your rent at the annual review. It’s that simple.
While you won’t become a property millionaire overnight, over the long-term, you can become exceptionally wealthy. Property is a bit like a flywheel: it takes a lot of energy to get going, but once it’s up to speed, practically nothing in the world can stop it.
Look For “Growth” Properties
The property investment market is not perfectly efficient. Differences in rental yields vary dramatically from one location to another, and from one home to the next. The reasons for this are complicated, but suffice to say, it is an opportunity for investors. You can often find properties offering double-digit yields and, sometimes, above 20 percent.
The most opportunities are in “homes of multiple occupancies.” These are properties with multiple, self-contained units, all under one roof. The investor purchases the building (or a share of it) and then receives rental income from multiple households.
Typically investors prefer this type of arrangement over any other. With many streams of income, they can reduce risk, meet borrowing costs, and get a higher rate of return than if they were renting out the property to a single occupant.
Time The Market
The property market, just like any other, goes through cycles. Under certain conditions, the price of housing races ahead of inflation; in others, it lags.
At the moment, we live in a world that has conspired to make housing more expensive relative to wages. People are having to save up more money and take out mortgages that are many times their income. For now, it appears that this state of affairs will continue. Central banks will keep interest rates low, protecting the balance sheets of private banks that are heavily extended to mortgage borrowers. A fall in house prices is against the interest of the banks, so the government is unlikely to take any action to bring them down.
Once you understand the factors that determine global and local prices, you’re in a much better position to buy. If you think that prices will go up, then you need to buy now to take advantage of the appreciation. If you believe prices will fall, you’re better off selling now and using your capital to invest in a property with higher expected returns.
Choose Properties Classes You Understand
Interestingly, there are opportunities for investors with differing expertise across the real estate industry. Some will find themselves more at home in the commercial office space while others in the private rental market.
The range of different types of property is extensive. According to https://houstoncapitalhomebuyers.com/mobile-home-value/, there’s a vibrant market in mobile trailers. For investors who want to get rich, this choice is important. You get to specialize in an area you understand while leaving the rest of the property investment market to others who follow it. Other sites, like https://www.investopedia.com/investment, talk about the opportunities offered by mixed-use properties that combine both commercial and residential.
Look For Hotspots
Some parts of the country are currently experiencing faster house price growth than others. Las Vegas, for instance, has seen property prices rise more than 10 percent this last year.
Don’t look for places that are hot right now: think carefully about where might experience the fastest growth in prices over the next five to ten years. Look for areas with the potential for becoming the economic hubs of tomorrow. See whether any major businesses have plans to set up facilities in the vicinity of the location and then use this to predict future house price growth. Areas like Phoenix have seen dramatic explosions in real estate prices because of friendly tax policies, encouraging people from California to hop across the border to Arizona.
Go Against The Crowd
Finally, it’s worth ignoring what the crowd is doing and try to head in a different direction, based on an original strategy. Right now, everyone is piling into HMOs, but you don’t have to necessarily. As an investor, your skill is in your ability to sniff out opportunities in the market and put them to work for you.