Property Investment Risks - FB

Today, the market is saturated with property investment companies. Most are primarily focused on getting you to invest in their properties, making you believe you can achieve your dream of gaining high returns within a 10 to 20 years span – leaving you financially free and all set for early retirement.

A handful of these investment consultants would include you in focus groups, while others would use the typical direct sales approach. What they say, coupled with property reports with projected statistics, may often seem highly convincing, but as much as you want to put all of your trust in them, you have to be aware of the risks involved as well as the potential consequences that comes with blinded trust.

Here are some of the risks you should take into account when you deal with property investment companies.

‘Free Property Reports ‘

If you are given free property reports about the properties that you intend to buy, take a good whether they address these areas of concern:

  1. How many properties will be built?
  2. What are the different types of properties that will be built?
  3. How is the current market growth?
  4. What is the projected market growth? Look for short-term and long-term growth.
  5. What are the possible risks involved?

Rather than relying solely on historical data and the look and feel of the property, you should make it a point to gather more credible information. Information such as the aforementioned are crucial as it will help you to determine whether the property will be a worthwhile investment.

The rule of the thumb is, regardless how well-packaged the free property investment may be, do not be fully dependent on it, especially if they are full of aesthetics.

What about the information ?

In Financial Services there is a saying that goes,

Data without information is meaningless.

The meaning here is that the data should come with crucial information that will help you to make a sound decision.

One example of crucial information is sustainable economic growth. Based on the Risk Wise research, properties that enjoy sustainable economic growth is known to carry low risk levels and approximately 83% outperform the benchmark.

Another example of crucial information is the preferences of the potential group of people with the intention to purchase the property from you. Do they have a particular preference in terms of the facilities? Are they comfortable with the reselling price within the next 10 years? Have they purchased similar properties for the past 5 years? How many of them are seasoned investors?

Who is the research team?

The people behind the free property reports can either be from the property investment companies or other research and statistics companies.

So who are they? What are their qualifications? And how would you know their reports are credible?

One way is to look for reports written by a reputable company or a research team that has a strong research background, extensive experiences, and/or advanced degrees. Check whether they have published anything publicly recently as well as the quality of the publications. Plagiarized content should not be entertained.

If the property investment companies are unable to prove their free reports are produced by a reliable company or research team, then that ought to set off your alarm bells.

Are the reports biased?

There is a possibility of the reports being biased as property investment companies have a vested interest in sealing the deal. They might present only the good attributes and disregard mentioning major risk factors.

A prime example is the units in Brisbane CBD. The reports that are being circulated disregards the mentioning of the high level of risk for property investors.

Do the reports meet your specific needs?

On most occasions, the reports do not meet your specific needs. This is simply because every investor has his or her own specific investment strategy, circumstances, risk appetite and financial position.

The way to go around this is to:

  1. Get your research reports from a reputable research company that specializes in research.
  2. Ensure that each report contains information such as the risk rating associated with your planned investment, the number of properties in the pipeline, the risk of oversupply.
  3. Ensure that the report contains macro-economic factors on the area.
  4. Check who is the research team, particularly the Head of Research, their education, qualification and experience, and which articles have been published in the media in recent months
  5. Not rely only on a report that is provided to you by anyone with a vested interest in the deal.
  6. Ensure that the report meets your specific needs.

There will always be risks involved when it comes to investments. There are many charming charlatans out there and it certainly helps to know some of the ways to lower and manage the risks.

By taking these pointers into account, you can save a great deal of your time, effort and money. Be best on your way towards achieving your targeted investment goals.