Investing in real estate – should you even consider short-term movements?

Whether you are buying a car, stocks and shares or real estate, we all endeavour to get the best price, to make as much money as possible and to live a very comfortable life in the future. The vast majority of professional investors see real estate investment as a long-term situation which has potential short to medium term opportunities for capital gains. There are some who trade on short-term movements in property prices and while it is more risky than a long-term investment many people do make good returns.

So, why would you ignore the short-term movements in property prices and concentrate more on the longer term?

The trend is your friend

First and foremost, if you are investing in real estate you should be looking longer-term because very often short-term movements are not necessarily enough to make a decent return on the money you are investing. The longer term situation can be very different and the ability to follow the trend, when we say trend we mean long-term trend, is something that not everybody is capable of achieving – it will test your nerves!

Quote from PropertyForum.com : “So you think you can make money in real estate?“

There are many investors who panic with short-term movements, economic troubles and indeed may bail out time and time again to avoid greater short-term losses. This is a sure fire way to lose money because very quickly a number of short-term losses can begin to eat away at your underlying capital. That is not to say you should not monitor the short to medium term movement in real estate values but unless the underlying economics and long-term vision changes, why would you sell?

Trading real estate is not easy

While many people will trade stocks and shares in the short-term, there are very few who will trade real estate over such a time span. There are opportunities to make money in the short-term, the number of successful short-term trades can add up to a significant return but for many people the timing is impossible to perfect on the way up and the way down. Some people will use an array of options and geared investments in real estate to make significant returns on relatively small movements but unless you are experienced in this particular area this is something to be avoided.

The vast majority of real estate around the world is held in pension funds, state investment funds and by individuals and companies who actually live and work in these properties. There is relatively little real movement in short-term property ownership although when markets peak or trough this can lead to a burst of activity and change in ownership.

Spreading the risk

While it is sometimes difficult to spread the risk of your real estate investments if you are investing in individual properties, there are other options such as real estate investment trusts. These particular trusts give you the ability to buy a small slice of a large property portfolio which could be spread amongst dozens if not hundreds of individual properties. These properties will be in different countries, different areas of business and different price bands so while not necessarily mind blowing returns in the short-term they do tend to follow the long-term trend.