Over the next few weeks there will be a lot of discussion about investor sentiment around the European Union referendum in the UK. If you are purely and simply a property investor it can sometimes be difficult to appreciate the outside influences which should be considered when investing your hard earned cash. This is what makes investing such a challenge, the ability to look at specific assets and arrive at a fair value while also incorporating potential outside influences which may impact your risk/reward ratio.
Regional, national and international property markets will always reflect potential changes and economic performance in the short to medium term. While property prices and potential for long-term capital appreciation will always be central to your investment decisions there are many other factors to take into consideration.
If you look at a specific region you will need to take into account the forecast economic performance for that area, for the country and for the worldwide economy as a whole. It may seem a little over the top to bring in the worldwide economy although if you look back at 2008 you will see we are nearly a decade into what has been a very challenging period. While the majority of us are unlikely to experience anything like the aftermath of the 2008 worldwide economic collapse, it does show how you need to take into account not only the local and national economies but also the worldwide economy.
Your financial situation
We have all seen those deals which are “too good to miss” but nothing happens overnight and if a transaction ends up stretching your finances to the limit you may live to regret this. A good deal is only a good deal if you can afford it and if it is a long-term investment, can you really afford to leave your money aside for any great length of time?
Many people plough headlong into a career in property investment thinking nothing will go wrong, markets will not change dramatically and there will always be demand for property. There will always be demand for property but short to medium term market volatility can be dramatic and magnified even more in the event of worldwide economic issues. Monitor your finances, leave yourself some headroom and ensure that you are always in control of your finances, as opposed to your finances dictating your next move.
As property investors approach retirement there will come a time when you will need to reduce your property exposure and convert this into cold hard cash to fund your future lifestyle. It is vital that you have a long-term plan for retirement and slowly but surely increase your liquidity to cover your long-term financial needs. This does not mean to say you have to sell all of your assets but ensure that you gradually build up your liquidity for later years.
Putting together a quality long-term property portfolio takes time, money and effort but many people ignore long-term financial planning issues which can force their hand in the future. Always ensure that you are in control of your properties and your finances as opposed to the other way around.