How Does Investing In Property Work
So if someone asks about the economy, many people would reply that it goes up and down. But it's obviously not as simple as that, and within that broad word economy, there are a multitude of sectors that simply buck the trend.
For many people in the UK, growing up you would have overhead the mantra "always buy property it always goes up in value". For generations after the war, their aspirations were to become part of the property owning classes. Some wanted to go further and along with owning their own home, wanted to invest in property.
So is property investing guaranteeing profits, does the mantra still stack up today? Let's examine some of the fundamentals.
Land is finite. That is, there is only so much of it (unless you build yourself land as they do in Holland!). We live on an island with an ever increasing population. So unless there is the return of the black death the demand for property can only increase. So by those facts, property should always increase in value. Well it doesn't obviously. Any asset is only as valuable as the price someone is prepared to pay for it. With more businesses closing down that being started, the value of commercial properties falls.
So commercial property is no safer kind of investment on it's own as any other kind of investment. As in any kind of investing, the only strategy is to buy low and sell high. So, you need to know your market (global and local), and work out where you are in the particular economic cycle. Are we currently on the downward slope, are we peaking at the top, or are we in the ideal place of just coming out of the dip?
What do you do before investing money? Invest in knowledge. Whatever the sector you are considering investing in, study, study, study your market. Nothing can replace knowledge. Knowledge in itself is NOT power. It's the use to which you put knowledge that is power, and the more you know about your local market, needs, local industry, future demands, the better placed you are to making an informed decision and purchase.
Guess work should never come in to it. Know your market and it's needs, make educated calculations on the state of the market, and make a decision. But, as with any investment, always have a contingency (back-up) plan, and don't put all your eggs in one basket. As much as the numbers may see this is "a good bet", it's still always a bet and things do go wrong.
Saying that, you need to decide whether you are in it for the short or long term. Over twenty, thirty years, most properties (conditional on their state of repair and needs of the sector), will increase in value. And as opposed to other kinds of investment, you'll always have the land and the building at the end of the day.
Investing in commercial property is an educated gamble based on knowledge and experience. Start off small, building your know-how and team. There are several other articles on this site that go in to more detail about starting out. Too much knowledge in this instance can only be a good thing!
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