What one bit of advice would you give to a new property investor?

We all started at the bottom with limited experience and perhaps limited funding and no doubt along the way we were given advice and guidance by people we trusted. So, if you could give one piece of advice to somebody new to the property investment sector, what would it be?

We will set the ball rolling with a number of ideas but we would welcome your comments and suggestions.

Fools rush in where angels fear to tread

When you have money in the bank there can be a tremendous temptation to invest as quickly as possible. The worldwide investment market, not just the property market, is littered with individuals and companies that rushed into investments just for the sake of it. Sometimes when you have money available an investment can look more attractive than it really is simply because you are looking to invest. However, never rush into an investment, never plough your money in for the sake of it and make sure you do your homework and research before even considering an investment.

Run your winners, cut your losers

It sounds very easy, run your winners and cut your losers but these are perhaps two of the most difficult skills to learn. The vast majority of property investors will likely cut their winners too soon simply because they are excited at the prospect of making a profit. On the flip side of the coin, it is very easy to run your losers simply because you do not want to be proven wrong and you are “convinced” the investment will come right. Again, the world is littered with those who cut their winners and ran their losers, which is the exact opposite of what you should aim for.

The trend is your friend

Whether we like it or not the “market” should never be ignored because it is simply an information exchange where different views and opinions are disseminated. The trend really is your friend but when using this type of investment strategy you need to know when to buy and when to sell. Very often when positive trends begin they will turn very quickly and when they come to an end they can downturn just as quickly. Therefore, if you’re able to get in just after the trend turns upwards and sell just before the trend turns downwards you won’t go too far wrong. If only it was that easy!

Leave something for the next investor

As Lord Rothschild once said “the reason I am so rich is because I always sold too soon” which again seems like a bizarre statement but sit back and think about it. If you hang on to your assets until the very end of the trend, when sellers get the upper hand and buyers disappear, it can sometimes be very difficult to sell on the way down. After a significant upward movement it can sometimes be a race to the bottom with short-term investors looking to sell at any price to liquidate their assets.

Therefore, if you believe the market has another 10% upside and you sell your assets after a 5% increase then effectively you are leaving 5% for the next investor. However, if you held on for the expected 10% increase and were unable to sell before the market turned then you could be in trouble. There will be other investors also looking to sell before the market turns which can lead to a self-fulfilling prophecy and an earlier than expected change in the trend (this also works when a market has fallen and investors are looking to buy).

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