So you think you can make money in real estate?

If there is one investment market which attracts the attention of would be millionaires it has to be the real estate sector. In theory the real estate sector in the UK has similarities with the European real estate market, US, Australia, etc, etc. When you look at the stories of people building up multimillion pound property portfolios, the ever-growing rental income these provide and the long-term capital gains, what could be easier?

There is a saying in the investment market which perfectly illustrates the current situation we are in with regard to the worldwide real estate market. It is very easy to make money in a bull market but quality investors will still make money when markets are struggling.

Run your winners and cut your losers

Sounds simple? Well, in theory the idea of running with your winning real estate investments and cutting your losses with those which have disappointed sounds fairly straightforward and very simple to do. But is it?

If you take a step back and look at the situation from a distance, how many people actually cut their winners and run their losers?

It is never wrong to bank a profit

The day when it would be wrong to bank a profit with any investment will be the day when investment markets are no more. Banking a profit, no matter how much you “might have made” if you had held on, is the whole idea of investing. If you can bank profit after profit after profit this will give you a greater pool of funds to invest and slowly but surely you will continue to move ahead.

Cut your losers and walk away

Those who let human emotion become entwined with their investment decisions are those more likely to panic and cut their winners, possibly early, and run their losers. The simple fact is that when you invest in any investment it is your decision, you control when to buy when to sell although those with an ego are potentially setting themselves up for a fall. If you buy an investment and then in the short to medium term the situation changes and it does not look as attractive, what should you do?

This all depends on the income the investment is providing, the short, medium and long-term potential for capital growth and the opportunities elsewhere. Do not hold on to an investment which is losing money simply to prove a point to yourself that you were right. The world is full of individuals who believe they are right about every investment decision they ever made. This group of investors will also contain the largest number of bankrupts, stagnant investors and those who’ve let human emotions ruin their investment CV.

Do your homework and monitor your investments

While real estate investments do not need to be monitored on a daily basis, as you would stocks and shares, you do need to monitor events within the wider marketplace. If there is talk of overheating then maybe it is time to look at taking a profit? If there is talk of a recovery then perhaps it is time to look at specific markets with a long-term view in mind?

The simple fact is that no real estate investor will make money on all of their investments but the best ones know when to cut their losers and when to run their winners. This is the difference between somebody plodding along and making a living against those who go on to build multi-million pound real estate portfolios which bring them a lavish lifestyle and attract very exciting investment propositions.

Take it slowly, monitor the markets, only invest in real estate in which you have a direct knowledge and do not get involved in chasing the latest trends. Many people do make a living out of chasing the latest trend but sooner or later your timing will be off and you could suffer serious financial losses.