Pillars to S.M.A.R.T Property Investment

Acquisition of real estate entails more than just finding a place to call home. Real estate investment continues to become increasingly popular over the years. Although the real estate market has plenty of opportunities for making huge profits, buying and owning real estate is a lot more complicated than investing in stocks and bonds. As you think of investing in income producing real estate as an excellent choice for protecting and growing your portfolio, “you just have to be S.M.A.R.T about it”, as Micheal Yardney puts it;

S.M.A.R.T is an acronym that stands for ;

S: think strategically

M: Manage your risks

A: invest against the grain

R: Review regularly and

T: work with a Team

Strategic Thinking

A smart investor needs to focus on a well thought out plan that will keep them true to themselves and their overall goal. Smart investors use specific strategies to create and sustain wealth throughout the inevitable cycles of the real estate market. They analyze key drivers, and adjust their tactics to account for market influencers. Smart investors know exactly what they want to achieve and make sure their investment decisions work towards that goal. Smart investors work towards educating themselves before commencing development (think real estate due diligence).They know their options for making profit from real estate and can determine which properties will help them achieve their particular goals.

Risk Management

Administration and risk management is a critical component of real estate investment, given the level of risks involved could be as high as the potential gains. A sound finance strategy is very important. Experts advise you to avoid over-leveraging as well as build in sufficient financial buffers in your lines of credit or offset accounts to see you through the ups and downs of property investment. Smart investors work on covering negative gearing costs and flat stages of the property cycle and they have an exit strategy in place for poor performing investments. Smart investors not only manage the financial risks that come with property investment, but work at minimizing their risks.

A smart investor must balance the value of the investment with the risks incurred. When a risk is identified, he/ she can address it by either; avoidance, control or risk transfer. Hiring a project manager will come a long way in helping to minimize risks involved in property development. He will plan for problems, keep excellent files and records of every activity, and continually assess these functions to determine if change is necessary.

Investing Against the Grain

A smart investor studies and understands how the Real Estate Cycle is performing. If not, investment decisions could be based on market influencers rather than market drivers, which could be a dangerous oversight. Those who invest and analyse based on influencers often end up surrounded by chaos, emotions and a tough financial state. Those who invest based on the drivers are the investors who always come out ahead. A smart investor understand that the property market moves in cycles and appreciates the power of counter cyclical investing, so they don’t usually follow the crowd. While most people diversify due to the “hype”, smart investors realise that it’s okay to stick to a niche in their investing.

Regular Portfolio Review

Smart investors know that a property portfolio is not a static thing and should never be viewed as such. Property Investment is about getting maximum return from financial resources. A smart investor regularly reviews their portfolio and analyse performance to determine how the property has performed over the past in terms of capital growth, if there is anything to be done to improve the property and get a better return on investment or find out what is happening in the local market of the property including any changes in the demographics.

Working with a Team

A smart investor knows that “they are only as good as their team”. He/She knows that the success of any property development is underwritten long before construction commences. Smart investors get experts to follow a sequence of steps from the moment they first conceive a project to the time they complete the physical construction and begin ongoing asset management, to ensure project success. Smart investors employ a team of independent professionals to help them including; Finance & Investments Consultants, Property Managers, Quantity Surveyors, Architect, Physical Planner, Construction Engineers, and Property Manager. At the same time, smart property investors are cautious .They build their portfolio under the guidance of their advisors and are ruthless in ensuring they have the best people in the business on their side.