Property Investment can be a very good way to secure an income for your retirement. Stories abound of people mortgaging their homes, taking out investment loans and buying investment property that has then doubled or trebled in price. This is not just a dream, it has and still does happen. However the other stories you rarely hear about are the ones where the property didn't increase in value, or really bad tenants made keeping the property unviable or another unrelated issued occurred that necessitated the selling of the property. These are all events than can and do occur.
That is not to say that investing in property is not a good option. It can be a very good option. But like everything else, it is what, when, how and where you buy, as well as what, when and how you sell that makes the difference.
One of the Gabor sisters, when asked her occupation famously replied
"I am a housekeeper darling! Every time I get divorced I keep the house." Said in jest, but not a bad sentiment nonetheless.
You see whilst you will hear many experts providing advice on what to buy and when to buy it, it is not always buying the property that makes you the money. It is when you sell it. And picking the right time to sell, the right selling strategy as well as the right agent or broker, is also key to making a profit.
All real estate should be looked upon as an investment, even your family home. Because although you will probably never entertain the thought of selling the family home, personal circumstances change and at the end of the day, we all generally have our price. I love my home, and it would take well above market value to get me to sell, but it's not a matter of whether I would, it's a matter of how much it would take. And I confess it would take a lot for me to sell, probably three to four times market value, but I would sell.
One of the keys to making money in property is to control when you buy and control when you sell. Easy you say. Well not so. Controlling when you buy is easy if you have liquid funds up front, however if you are dependent on a mortgage then you are at the mercy of the lending institutions, who will determine what they will loan and when they will loan.
Having said that even if you are dependent on a mortgage you still have reasonable control over when you buy. The other side of the coin is ensuring you have control over when you sell.
There are many reasons to ensure you control when you sell. Some governments have requirements for taxation on capital gains, and there can be varying taxation requirements of where you want to put the profit. However the most critical reason to determine when you sell is the state of the market.
Whilst there are many other indicators of when you should sell, this article is more about ensuring that you have structured your affairs so you can control when you sell. And that means either having a positively geared property, i.e. a property where the rent covers the mortgage and other out-goings, or having sufficient liquid funds or investment income to cover any shortfalls. This is about ensuring that you have the financial capacity to ride the bad times and afford to wait until the market turns for the better, to sell.
In short when buying investment property one of the considerations you must make is whether you want to be able to control when you sell the property. If you do, you will need to ensure you structure your affairs to ensure you have sufficient liquid funds to enable you to determine when you want to realise your investment.
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