Are You Investing Or Just Glorified Gambling?
By making the right choices, you can mitigate risk, but there is an approach to property investing which is not investing at all, it is what I call glorified gambling. Frank Valentic explains.
Over the past 18 years as a buyers advocate I have met many buyers who have engaged my services after previously making a property purchase, one which they thought was a great investment but as it turned out, it actually wasn’t. The scenario seems to have a fairly repetitive blueprint and the outcome is always the same, they lost big! You’ve probably heard someone say property is a sure thing, well it’s not always. To an extent, with any investment, you run the risk of not making money which when you factor in your time, is ultimately the same as losing money. However by making the right choices, you can mitigate risk, but there is an approach to property investing which is not investing at all, it is what I call glorified gambling.
Chances are if something sounds too good to be true, it probably is. Don’t get me wrong, there is a lot of money to be made in property and when property investing is approached correctly, I dare say it is one of the more secure investment options, especially within Australia with such regulated money lending.
Property investment has one key rule which is often forgotten but is vital above all else, it is all about supply and demand. It holds true for both the rental and sale side of property returns. Property holds its value because shelter is one of our most basic human needs. Any purchase you make, however, must take into consideration supply and demand with foresight.
For example, locations which are built upon the success of one industry or business will always be a high-risk investment. When the mining boom was at its height, small towns which previously had homes that you couldn’t give away, tripled in value overnight. The problem is that when the mines close down, as many did, those same properties are worthless again overnight.
Purchasing ‘off the plan’ in high rise apartment developments is something which seems to really attract the novice investor. They often love the idea of buying brand new, thinking it will be low maintenance and they are told they will come out on top due to depreciation benefits. Unfortunately, the reality is often different to the sales pitch, by the time these developments are actually completed, there are often hundreds of apartments available either for rent or for sale at any given time. This goes against the supply and demand philosophy at its very core and the only loser is you, with buyers and renters able to push you down on price because multiple identical properties are available at any given time. This often results in the property being sold for less than its original purchase price.
With one in six properties within Australia now selling for over a million dollars chances are if you are investing in property, it is not a decision to be made lightly. If you feel out of your depth with what you should be purchasing it is not to say property investments are not right for you but that you need to engage a professional and someone who will give you the honest advice that a buyers advocate with a proven track record, would be a wise investment.
There are no guarantees in the world of investing, but there is no need to gamble when there are so many ways to ensure that the cards are dealt in your favour and that you can avoid costly mistakes.