The seven laws of property investment

*This content is brought to you by Wealth Migrate

By Scott Picken*

Few people would join a simple game of Monopoly without a good understanding of the rules, so why enter the world of property investment without getting to grips with the laws that govern whether you make or lose money.

Scott Picken
Scott Picken

First, understand what you are doing. Before you put your cash into the latest, shiny deal, make sure you know everything you can about both the world of property investment and the particular deal you have chosen. This does not mean talking to your mates, not matter how clued up they may seem. It means reading books and going online to get a firm foundation in the asset class.

The second law is about taking responsibility. Don’t allow yourself to be swept away by your emotions – smart investors drill down to look at the numbers and do all the sums to get a good understanding of what the investment could generate.

The numbers will give you both the upside and the downside to the investment, so you can decide if it is worth your while going ahead. One of the most important things to consider is the track record and expertise of the real estate developers or sponsors. Investigate their history – including past development projects – so you can be sure they are worthy of your investment.

The third law is to buy from a motivated seller – someone who is eager to sell so you will be able to negotiate a deal that is favourable for you. At times of financial stress there are many opportunities available through bank repossessions or developers facing foreclosure on their projects. When the pressure is on, it is all about survival for the seller as profit is no longer an option.

The fourth law is about building the kinds of relationships that will build your wealth. Technology may increase efficiency, but nothing replaces old-fashioned relationship building.

Begin by making contact with like-minded partners who are considered experts in this space and find ways to work with them. Look for real investment technology players who have actual real estate experience and start building and nurturing those relationships. Use the precious asset of time smartly by developing a strong network of contacts, including real estate agents, brokers, developers, bankers and successful real estate investors.

The fifth law is to look at cash flow and then capital appreciation. The global financial crisis taught many investors that chasing a quick buck can end badly, and it is better to focus on ensuring your investment provides a reliable and stable income.

Investors can make good returns even in lean times by being savvy and seeing the opportunities available in a down market, and then focusing on the upside potential and the projected income. These investors not only have a Plan B in case of a downturn, but they are also better positioned to “ride the wave” despite fluctuations.

The sixth law is investing with an exit strategy. You need to understand the real estate value change and how it works in order to move up it. Less than 1% of people retire wealthy because they invest at the wrong stage of the value chain.

Law seven is about growing your own globally diversified property portfolio, and it involves compound interest – Albert Einstein’s “eighth wonder of the world”.

By using a platform, such as the Wealth Migrate, you can reinvest your returns from your investments and get growth on top of growth. The small investment minimums allows you to reinvest all the returns, whether from cash flow or capital growth.

Don’t wander into the world of property investment without taking the time to go through the seven laws to prepare yourself, this can ensure that you chart your course to a life of financial freedom.

  • Scott Picken is CEO and Founder of Wealth Migrate.