Are there any shortcuts to property wealth?

On paper, investing in property seems fairly simple, seems very lucrative and more people are investing in real estate than ever before. If you take a step back and look at property investment, the idea is fairly straightforward, choose a good value property, rent it out or live in it yourself and wait for the value to rise. However, if only everything was as simple as it looks!

Look long-term

There are no property millionaires or billionaires around today who have made their money overnight. The trick to investing in property and real estate is to look long-term, to build up a portfolio and to ensure that your finances are solid. There may be times when an investment looks too good to turn down with the potential of a short-term gain but on the whole it does take time.

We only need to look at the buy to let market in the UK over the last 20 years or so which grew dramatically, making serious money for many investors and then collapsed. When the market collapsed it became evident that many investors were basically increasing their risk profile by raising more and more capital on existing assets. It was obvious from the outset that as the worldwide economy wobbled and interest in real estate faded many buy to let property portfolios would fall like a pack of cards.

Do your homework

There are many investors out there who will recommend following the crowd to make a good return on their property portfolios. In some cases this can create significant wealth, improve returns and gain exposure to liquid markets but sometimes it can go horribly wrong. If you can predict a new hotspot at a relatively early stage of development, invest your funds and then see the market rise, there is enormous wealth to be made. However, those who follow strong markets towards the end of the cycle may be left holding property at a loss with no buyers.

As you become more experienced in the worldwide real estate market you will notice certain trends and certain changes – ultimately you will get a gut feeling as to whether a particular investment is for you. This will come with time but the more research you do the quicker your mind will adapt and you may well begin to see potential hotspots of the future emerging at a relatively early stage.

Protect your finances

As we touched on above, many property investors who made money on their first investment can easily get carried away using “paper profits” to borrow more money to expand their property portfolio very quickly. What on the surface may look like a relatively strong property portfolio could be very different behind-the-scenes with very little margin for error regarding financial liabilities and income. As we touched on above with regards to the buy to let market, borrowing up to the hilt to acquire “value property” does not always work because one bad apple can bring your whole portfolio crashing down.

If you take a long-term approach to property investment and build up paid off property as a backup this is where you begin to see significant returns. The fact that you have properties which have no debts attached to them gives you a solid backbone during the inevitable future wobbles in the worldwide real estate market.