Avoid Three Expensive Errors In Property Investment

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Property investment has been a long and experienced wealth builder. Folks had built fortunes throughout the centuries by owning real estate. If it was true then, it is even more so today.

Yet at the same time, there are far too many people who fall into financial difficulties because they invested in real estate. I personally know of one of my own colleague who is up to his neck with debts because of property investment. When you sit down to think about it, isn’t it odd? The same investment that is making some folks rich is sending others to their doom! Although there are obviously many reasons leading to this situation, one glaring point is that the people who are making money know something that the others don’t. Now, while one do not have to have a PhD in properties to make money from it, it is also obvious that the more you know about it, the more money you will have.

Properties are also straight forward. The more properties you own, the wealthier you will be. As to why this is so, the reason is simple: a person who has financial difficulties will never come to the situation of owning five or more properties; he has enough problems even to own one! For a guy to own five or more properties, he has to know what he is doing and should be a master of his finances already. While there are always exceptions, that is the rule of thumb when it comes to properties.

Now, the three common errors folks make in property investment are (1) buying in the wrong location, (2) buying the wrong type of property, and (3) making decisions based on what happened in recent history. Unfortunately, all three errors are very costly, very expensive and also very demoralizing.

Buying in the wrong location

This is the fatal and yet, the most common error. Folks keep on buying properties in the wrong locations (for their purpose). The solution to this is simple – if you are buying for your own use and intend to stay there forever (or close to forever), then you can buy a property in a location where you like. This may be in your own kampong, town or orchard. But if you are buying a property for investment purposes, you have to buy where ‘others’ like. And the ‘others’ here have to be in the thousands, not one or ten or twenty individuals. You realize that you may be buying in a place where even you do not personally like. But as ‘personally liking’ is not a criteria for making money here, it should not be in the equation at all.

Buying the wrong type of property

This is the second most common error – buying the wrong type of property. They want rental income but they buy houses. They want capital gain but they buy apartments. In this case, the answer is the opposite. For example, if you are buying for rental purpose, there is only one answer – apartments. If you are buying for capital gain, then the answer is houses. In other words, buy the right property for the right reason of investing.

Making decisions based on what happened in recent years

The third and most common mistake is making decisions based on what happened in recent years. A lot of people think: prices have increased in the last three years so the trend will continue for the next three. This is a very dangerous type of thinking, especially in the rapidly changing environment of this new decade. What happened in the past five, ten or even twenty years may not be repeated in this decade. So, anyone who had based their investment decisions on recent history may soon be licking their wounds. There is a very real threat of prices going down in the near future. Add the very real possibility of interest rates shooting up, and you can see that it is a whole new ball game altogether. These latest challenges call for new and innovative answers.

As mentioned earlier, the more you know about property investment, the higher are your chances of making money from the investment. You will increase your profits, reduce your work and more importantly, reduce your errors drastically.

When you consider that the cheapest property in Malaysia now is RM100,000, isn’t it worth investing a little bit of money to learn how to do it right? Remember that the knowledge will stay with you for life!


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