Investors should never get attached to their property assets

Discussion in 'Property Market News and Trends' started by Nicholas Wallwork, Dec 5, 2015.

  1. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

    Those who invest in property would have you believe they are very different from traditional stocks and shares for example. The truth is that whatever you are investing in should be seen as “boxes” which you buy and sell to create an income and hopefully a capital gain. However, a growing number of property investors seem to get awfully attached to their new assets and when the time comes to say goodbye they find it difficult.

    This may sound like common sense, after all it is very easy to get attached to a beautiful property, but if you’re looking to make cold hard cash in years to come you need to cut off from this emotion.

    Never get attached to your investments

    Human emotion is something that many in the investment markets would like to remove but in reality human emotion makes a market. If everything was simply an analytical transaction then everybody would be doing the same thing at the same time. Emotions such as fear and greed are well documented as the main reason for the peaks and troughs which markets often experience. However, a reluctance to let go of the property you have perhaps held for some time can cause major problems for your investment portfolio.

    Look at the cold hard facts

    Property markets rise and fall, demand peaks and troughs as does the price of property. While the long-term trend in the worldwide property market is most certainly upwards we will experience periods of downward pressure. One of the problems some investors have is the feeling that they “have to be in the market” when sometimes it is better to sit back on cash. Can you imagine the position you would have been in now if, back in 2008, you had sold your property at the first sign of financial concerns in the US mortgage market?

    Hindsight is a beautiful thing but there is no doubt that once property markets began to fall some professional in investors made a rush for the exit which led to a significant reduction in prices. A belief, based on historic investment valuations which were no more, that your favourite property would hold its own can very quickly evaporate. By the time many investors come around to the thought of selling their property and holding cash, it can be too late.

    Live to fight another day

    The insatiable need of some property investors to be fully invested can be extremely counter-productive in difficult markets. True, there may be attractive rental yields in the short term, interest rates on deposit may be minimal but who knows what lies ahead when markets begin to tumble?

    The property market is most certainly something you should look on as a long-term investment but that does not mean to say you can’t change your mind and switch from assets to cash. We often see a similar scenario with stocks and shares where after an initial fall many shareholders refuse to sell and it is only after continued falls that they panic and bailout.

    In some circumstances they may have bailed out near the bottom when in reality the shares have perhaps gone too far to sell. Taking a step backwards, looking at investments in the cold light of day and overlapping future forecasts with current asset values will ensure that you “live to fight another day”.

    The post Investors should never get attached to their property assets appeared first on Property Forum.

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