Property investment, don’t be spooked by the numbers!

When you start out in the world of real estate investment you will likely start with a relatively small pot and look forward to the future when you can make life changing money. In the early days, when the investment figures available to you are relatively small, you may end up taking more chances than you would normally if larger figures were at stake. However, whether you are investing a relatively small amount of money or looking at a multi-million pound deal in years to come, property investment is all about the figures and you must not get spooked by the numbers.

Like any investment, you need to look at the pros and cons, the risks and the potential rewards, and look at the percentage returns. Some people make the mistake of looking for small returns as their investment funds grow when in reality you are still taking risk and it should be based upon the percentage return as opposed to the fiscal return.

Detach yourself from the money

Before we look at ways in which you can detach yourself from the money which you invest, there does need to be a degree of risk to make any reward. It is also sensible, which may surprise you, to have a fear factor when investing any money because this keeps you sharp, this keeps you focused and ensures that you do not become complacent. When you look at the barebones, the bare figures, complacency can be the mother of all evil!

Quote from PropertyForum.com : “While the above question may seem a little bizarre at first glance, if you sit back, think about it, it does make sense to ask the question. In simple terms, should you learn from experiences in the past or should you be looking forward to the next leg of a property market rise or fall?”

As you become more accustomed to real estate transactions, writing large cheques, covering the cost of fees, slowly but surely the enormity of the money which you are investing will begin to pale into the background. If you believe a particular property market as a potential upside of 20% then focus on the figure of 20% whether this is 20% of $100,000 or 20% of $2 million. The figures are the same, the fiscal returns are different and you should focus upon this when considering your next move.

Detaching yourself from human emotion

Human emotion, the reality is we cannot control this, dictates that long-term decisions can be influenced by short-term events. You may invest in a particular real estate property with a 20% long-term return in mind but you may well see a short-term increase in the region of 5% or 10%. Would you be mad to take a short-term gain and potentially miss out on the long term? The reality is that it is never wrong to take a profit, making money from an overbought or oversold situation, but you need to balance this out against the long-term potential rewards.

If you ask all of the successful real estate investors in years gone by, and indeed investors with a good reputation today, they will all tell you that real estate investment is a long-term game. Like the stocks and shares market, with the likes of Warren Buffett, taking a long-term position in a particular asset can pay enormous dividends as opposed to taking relatively short-term profits where perhaps the return does not correlate with the funds you have put at risk.

Conclusion

Once you are more used to dealing in real estate investment you very quickly realise that it is all a numbers game, the amount you invest, the percentage returns and the risk reward ratio. It is imperative, if you are to be successful in years to come, that you are not spooked by basic investment figures and focus upon the potential rewards against the balanced risk. That’s not to say you should not have a fear factor associated with investing any funds into the real estate market  but you need to appreciate in many ways that these are just numbers and investment is a numbers game. Human emotion can and will get in the way, is often difficult to control but those who make impressive long-term returns in real estate are able to discount short-term fluctuations and focus on the wider picture.