Property investment, for most people, is a way to earn revenues. For some it is a full time occupation, for others it is extra income. If you go into the jungle, you have to make preparations else the jungle will devour you. Only one beast in the property investment jungle can devour you – Yourself.
There are 6 unwritten rules of property investment. You would be well advised to follow them.
- Have An Investment Plan
- Seek A Mentor
- Buy Only Below Market Price
- Control Your Emotions
- Beware Of Investment Advice From Friends & Family
- Good Virtues
If you fail to pay heed to these rules, you are sure to commit Hara-Kiri, financial if not physical.
Property investment require a plan
We are preparing to descent into the jungle. Even the best guide will take some time out to prepare. Adventurers know the importance of a base camp where everything is organized, discussed and planned before execution. Well the investment plan is your base camp.
A plan is not made and then blindly adhered to. It is monitored, altered and adjusted constantly. The journey is in parts, from one milestone to the next.
-Target: The start is obviously to set your target. It can be a single statement like “I want to earn 100,000”. The target tends to remain constant. It provides a focus.
-Path: This part is a bit more complicated. You need to study, learn and decide how you will achieve your target. You have to keep adjusting the path with the target in sight.
-Time: Time provides gains or losses. Everything you plan needs to have a time perspective to it. Take time to plan. It is your insurance and can account for profit rather than loss.
-Property: Once you have decided on the property, you will invariably have to describe the parameters of the property. The purchase price, areas etc.
-Indicators: Indicators are situations and events that make you act or need your attention. Create lots of indicators. They are your fail-safes.
-Review: At regular intervals sit down and review your plan.
You may be lost with the ambiguity of the plan. It is normal. This is reason you need an experienced mentor.
Seek a mentor to guide you on property investment venture
The best know that they are not at their best. A mentor helps in many ways.
-Plan: A mentor will help you chalk out your plan and review it.
-Real: A mentor will be able to tell you what is real and can be expected.
-Pitfalls: You will not make beginner’s mistakes. Experience takes time. If you want to start with the re-inventing the wheel, you are welcome. It is smart to get a professional wheel instead.
A book or article can provide a lot of information. But only a mentor can provide personal guidance. After you have acquired a lot of basic, theoretical and practical knowledge, you need to tailor it.
Buy only below market price
This guidance is so important that it deserves its own section. In all your planning you cannot ignore one basic tenant. Only buy below market price.
You are a property investor. It is different than a property owner. Your aim is to achieve the target revenue. The property is only the means to reaching it. If you buy at market price, you are actually paying over the market price, since there are other costs that you need to add e.g. stamp duty.
In Malaysia, it is almost impossible to buy property below market price. In such cases, you have to be sure, that the property will appreciate as per your plan.
Control your emotions
There are many occasions where you will be tested. On all these occasions you need to remember that you have a target and a plan, you need to follow. A gambler feels the urge to play that game one more time. A property investor has urges of his own. The moment you feel, rather than think, that you need to act in a certain way. Stop. Go away from the opportunity. Remember, if it is good for you, it will fit into your plan.
If you feel your plan was not good enough, take the time to edit the plan. Revisit the opportunity. Remember, there are always enough new opportunities. You just need to find them.
Beware of investment advice from friends & family
A lot of articles lobby that you should not take advice from friends or family. As a crude statement, it is true. Friends and family consist of a variety of people, with diverse backgrounds. Property investment is a specialized field where every decision results in revenue or loss. So as a rule, be wary of advice from friends and family.
By now, you are not an average property investor trying your luck on your property investment anymore. You at least have a plan in place. Any advice that you receive, should be evaluated against two scales.
-Credibility: How credible is it? When your five year old son says that he is going to the moon, be a sport, but don’t start saving for a rocket. Most people giving advice will have a good intention. Remember that, after all they are friends and family.
-Plan: In case you find the advice credible, check it against your plan and evaluate. Do not discard it because it comes from a family member. Some of your best tips may come from them.
A man is known by the company he keeps. Do not surround yourselves with bad apples. In property investment, it is imperative that you keep good company. Some virtues that you should adhere to:
-Social: You will need to network with people in order to identify good property investment, buy and sell the properties. Be social and friendly at all times.
-Honesty: There is nothing that can replace honesty. Having honest people to work with is very important. Be honest in return, it pays.
-Legal: Do not do shady dealings in hopes of high profit. There are plenty of excellent legal opportunities out there.
-Paperwork: The Germans have a saying “Spoken is good, written is better”. Adhere to this principle. Back up everything with paper. Stick to the written word.
It is very easy to commit hara-kiri in property investment. You will need to follow the 6 basic principles that will safely guide you to suitable returns. Make property investment a positive and rewarding experience for yourself, family and friends.