The main pattern that unites almost everyone who invests in real estate is that they buy a property and never sell it. This pattern is the enemy No. 1 to obtain high yields sustained over time.
As in any business, buying well, that is, below market value, is key, even more so in real estate investment that has high transaction costs although it is true that it is very difficult to achieve it without being a sophisticated investor. But in the sale, a process that is usually easier, is where investors tend to fall into the trap. And the name of the trap is not to sell at the appropriate time. This error has a negative impact on performance, even much greater than the one that has bad buy.
With My Property Value is the most accurate decision if you want to sell your property at the right price. Call us now for more information.
There are several myths that have taken root in investors that make it easier to fall into this trap. These are the most common:
- Believe that the brick always goes up and never goes down.
It is shown that if a strong appreciation of a property is achieved for more than 5 years, it hardly remains.
The problem is that when the property is at a very high price and although it is easy to sell it since there is generally a lot of demand, most do not sell thinking that the value will continue to grow at the same rates. And that’s where the big mistake is made.
- Do not measure the performance achieved or its potential. Nor compare it with other investment alternatives to decide what to do.
The effort and hours of work that many people do in their different professions and activities to raise enough money to buy real estate is very great. But in most cases, after achieving it, the focus is not on maximising the return on that capital. Instead, one thinks of generating enough money again to buy another good and keep the previous one.
The impact of not having to maximise it is very significant. By efficiently managing a real estate investment, the capital invested in 20 years can be multiplied by 10. If passive management is done, that is, expert investors buy and keep it without selling, it can only be duplicated. Another interesting fact: with a passive investment it would take more than 150 years to multiply by 10 your initial investment while, as we said, with an active management you achieve it in 20 years.
The real estate investor seems only to settle for a refuge from his capital invested in real estate and cover himself with inflation. And it does not track the performance obtained year by year as it does with financial investments.
When we ask an investor, what was the net return on the portion of his estate allocated to real estate investment last year or the last 5 years, he can hardly answer it. One of the reasons is that there is no culture of doing so and, on the other hand, it is unaware of companies that dedicate themselves to managing that type of investment professionally, as is the case with financial investments.
It is very important to know that every 15 to 20 years that a cycle lasts opens a window of opportunity that usually lasts 5 years for each market and type of asset in which a property appreciates very strong, in some cases more than 10% per year. Therefore, it is very important to be clear on which phase of the cycle one is in to define whether to buy, maintain or sell.
The key is to always take advantage of the phases of strong appreciations but for that it is necessary to move from assets and markets. This allows to convert a traditional cycle that always ends at the same point, in an endless staircase.
As in any investment, the important thing is to buy cheap and sell expensive and real estate investment does not escape this premise.
- Not distinguish between real estate and real estate investments for own use.
In the first one does it to make money, in the second one to enjoy. It is important to separate what are properties of own use to those of investment since when mixing them it is very possible that you make the mistake of acquiring properties that are supposedly for investment but that are not the most appropriate to generate high returns. These also usually have limitations to execute an active management, that is to say buy and sell at the most convenient time.
If it is for your use, buy what you like and at the location you want. And keep it as long as you want. If it is for investment, enter and exit when appropriate.
- A matter of comfort and lack of knowledge: “So I’m going to sell it, what if I’m wrong?”
It is generally uncomfortable to have to inform, train and seek opinions from different real estate, financial and tax advisors, among others, to achieve an objective vision and to make a decision, but if you do not, nobody will do it for you and the cost Failure to do so is very high.
- Believing that real estate investment is always local or always international
Another great enemy is to see real estate investment only as local or international.
As many people consider it that way, they generally do not sell because they will do it if it is not business to buy again in the same market. That’s exactly where he has to look. There is no point selling to buy again in the same market and type of asset without obtaining strong advantages. The key is to move from types of assets in the same market or go to different markets to continue building profitability. For that, you will surely have to look for real estate advisors in different markets since generally the scope of these is usually limited to neighbourhood’s and types of assets.
With My Property Value is the most accurate decision if you want to sell your property at the right price. We will help you understand the right price estimation for your property and tell you how to sell it as fast as possible.