There are many different areas of the worldwide property market with varying performance under different circumstances. In reality you will never be an expert in all areas of real estate investment but you can gather general experience and technical knowledge and also focus on specific niche areas. However, which is more valuable when looking at real estate investment, experience or technical knowledge?
There is an array of articles, reports and surveys which highlight the very technical aspects of real estate markets and real estate investment. They take in everything from what makes markets move, what environments create a hotspot of the future and how markets can overheat and then correct themselves. If you take a look at the overall market from a technical angle it can seem quite daunting therefore it is best to look at specific subjects rather than take on too much too early.
The most obvious impact on the performance of real estate markets around the world is the economy. When we talk about the economy in this particular instance we are talking about the worldwide economy and then the local economy. Historically, unless there has been major volatility in the performance of the overall worldwide economy the greatest impact often comes from the local economy. However, over the last 10 years so we have seen a major impact from the worldwide economy on areas such as investment fund flow, sentiment and property prices.
Therefore, perhaps the best place to start is the economic angle and which environments best suit investment in real estate.
Supply and demand
Supply and demand may not seem overly technical at first glance but in order to project further forward and enhance your potential investment returns, you need to know what impacts supply and demand in the real estate market. Local infrastructure, local economic policies and employment markets are just some of the factors you need to take into consideration when trying to forecast future supply and demand. To all intents and purposes supply and demand is the most basic indicator when looking at worldwide real estate markets and knowledge of what impacts supply and demand is certainly helpful.
You can read all of the books on property, you can read all of the articles on the Internet and you can follow all of the experts but good old-fashioned experience still has a major part to play. If everything was simply straightforward and trends repeated themselves time and time again then there would be more people investing in property and more people making significant returns. Trends do repeat themselves in general but not exactly as economic environments and trends change, so simply following the trend because “it worked the last time” will not always make you money.
Good old-fashioned “gut feeling” is something which is very often undervalued but if you have been there and done it you can get a feeling for a particular investment opportunity. If you have significant experience in the real estate market you can compare and contrast current situations to historic situations and then factor in any differences. Knowing when to buy, hold and perhaps more importantly when to sell is something you will only really learn through experience. The temptation to cash in your profitable investments too soon can be extremely strong and the temptation/determination to make a profit from your poor investments can lead to significant losses. All successful real estate investors know when to cut their losses, run their winners and also when to sit on the sidelines with cash to hand.
In reality a technical knowledge of what moves markets is required together with good old-fashioned experience to get the best out of your real estate investments.