Investing in property isn’t risky like trading in commodities and foreign exchange. In fact, it can deliver substantial rewards with very little exposure to risk. However, because nothing in life is certain, there are some factors that every property investor should be aware of and guard against.
One of these is lower than expected capital growth, since no one wants to be holding a property that isn’t increasing in value, or worse still, decreasing. Occasionally you will get a dud property. When this happens all you can do is sit it out and hope its value will go up soon, or sell it on and find a better performing property that will rise in value faster.
While you can’t escape the ups and downs of the property cycle completely, you can reduce the impact by buying properties that are most likely to keep their value long-term. This means doing thorough research to identify the drivers that are pushing prices up in a particular area, or soon will be.
For example, is there likely to be an increase in the local population? Are new infrastructure works planned that will make the area more accessible or desirable to people who are currently living outside it? Are new schools, hospitals and workplaces being built that will encourage potential tenants and buyers into the area?