Smart Property Investment Does Not Depend On Luck

Would you make important life decisions depending on the flip of a coin or maybe the roll of a dice? However isn't this how a great number of people invest these days?

We’ve noted for many years that investment market commentaries is ever shorter time frames.

The stock market is now zig-zagging a bit: lower one day and up the next, and that is sometimes a sign that a correction might be due.

Not too long ago we heard that “the Cyprus bailout testifies that the economy has no future!” but today we are instead assured that “Cyprus is immaterial” - what was a poor investment yesterday becomes a good investment once again today? We now have minute-by-minute market commentaries and it’s certainly a crazy world we live in.

Market gurus love to have all of us think otherwise, nevertheless the immediate future is not predictable (take a look at what they were saying 12 months ago). The important point to keep in mind as an investor is this:

The more your investment strategy depends upon the market moving in your favour in the near-term, the greater the chance for failing.

The financial media frequently accounts share markets weakening as a time for you to freak out or worry and the index appreciating as something to celebrate. But you may be wondering what if you had an investment strategy whereby it does not necessarily actually matter regardless of whether markets move up or down?

It was Warren Buffett who said the most effective investors are those who develop a framework for effective investing and then are able to stop emotions from corroding that framework. This is the reason automated investing can be so effective for those who have a regular income. By purchasing shares on a regular basis through buying a pre-determined dollar value each month or each quarter, the investor remains emotionally unaffected by market hype.

The system is called averaging or cost averaging - if the market falls you efficiently purchase a higher amount of shares, and therefore will certainly make money over the long run. It makes sense in such cases to buy a well-diversified product to ensure that there is absolutely no risk of the investment falling to zero in value.

Averaging is effective in property as well, however because of the leverage the individual purchases are inclined to represent a more material portion of your portfolio, it becomes more important for investors to avoid encountering significant losses.

Similarly in the world of real estate, market gurus like you to believe that they can anticipate outcomes that you aren't able to, which explains the “I envisage no growth for 22.5 months”-type of nonsense and “a new gym is projected to open in 2014 which will certainly fuel capital growth” baloney.

The good news for property investors is that in contrast to the bourse, which is priced rationally for much (if not all) of the time, residential property is a frequently imperfect market. Thus, there are many of tactics that could be used in order to outperform the median prices so much loved of the financial media.

The first thing that you can do is buy counter-cyclically in a town which has not lately encountered a boom.

1) Purchase property below its innate value;
2) In an area that has a lengthy record of solid capital growth;
3) Find a property with a twist - something exceptional, exceptional, different or scarce about the property; and
4) Buy the type of property where you can “create capital growth” via refurbishment, reconstruction or redevelopment.”

By using these approaches, you are able to make sure that you aren’t just leaving your outcomes to the roll of a dice.

Obviously, it still is smart to track what is happening in the world.
Milan Doshi is a multimillionaire property guru and best selling author who gives regular talks on investing in properties. His Property Intensive seminars organized by Wealth Mastery Academy are sold out events that have helped opened the minds of millions across the world to the opportunities available in property investment. To know when the next seminar will be held, like the WMA Facebook fan page.