Our recent article about investing in property markets which have had a chequered past and troubled reputation ties in nicely with this article. In basic terms there are two types of investors in the worldwide real estate market, leaders and followers. Some investors prefer to follow in the footsteps of others while some investors are happy to plough their own path through the undergrowth.
Neither of these investment profiles is any better than the other but we all have ideas, we all spot gems from time to time but how many of us are brave enough to follow our own ideas?
Cold hard facts
There is an old saying in the investment world, it looks too good to be true then it probably is too good to be true. One priceless skill which the best property investors have is the ability to look at facts in the cold light of day and strip out any pre-emptive views which could prevent an investment. Facts and figures do not lie, if an economy is growing, the political scene is more stable and overseas investors are moving into a particular market, why should the past reputation have any impact?
Arriving on a decision using cold hard facts is the first stage in potentially unearthing a gem which could prove to be extremely lucrative going forward.
Looking from the outside in
While the cold hard facts will give you an idea of how a particular property market is performing and prospects for the future, you should also take a look from the outside in. Why are investors less prone to acquire assets in this particular market? Has there been a change in investor sentiment? Is there any chance that the country could fall back into troubled ways and volatile times?
While looking from the outside in goes against the whole philosophy of looking at cold hard facts, this may well allow you to judge mispricing due specifically to past reputation. Some markets will be severely oversold because of the reputation of a particular area and sometimes you can take a position allowing you to benefit as the reputation improves and the oversold position is reduced. Sound simple?
Take a long-term view
This is very similar to buying shares in a company which has perhaps had troubled times but is now showing signs of life. Investors will not pile back into these companies at the first sign of an upturn but instead they will need to see a changing trend. This situation can emerge in troubled property markets as investors will not jump in lock, stock and barrel at the first tick upwards but will instead look for a period of consolidation and then recovery. If your research suggests that this initial upturn is the start of the recovery then maybe you should look at building a position with the intention of increasing this as the market recovery take shape.
After you have done the research, looked at the facts and figures and started to see what you believe to be recovery in property prices, this is where your bravery will be tested. Are you brave enough to have the courage of your own convictions?