Taking risks is a key component of any successful business and it applies to property investment as well. If you really want to achieve your financial dreams then you need to be prepared to take some calculated risks and stop “playing it safe”.
The property investment business is volatile and opportunities present themselves every day. In order for you to take advantage of these opportunities you have to understand the risks involved and the potential returns of taking those risks. It could be that you are looking to rapidly expand your portfolio or increase your net yields from the properties that you purchase.
What Are Your Financial Goals?
The first thing to do is to determine your financial goals. Think about what you are trying to achieve financially over the next year, five years and ten years. Write this down and then you need to have a plan to achieve this.
Taking calculated risks requires courage so you will need to have a big WHY attached to your financial goals. Ask yourself what you will do when you achieve your goals. Visualise the money in your bank account and some of the things that you will spend the money on. Make this real so that it drives you to make those tough decisions and speculate more.
Dealing With The Negativity
The property investment business is littered with people that will want to advise you not to take risks. Some of the advice will be good but others will just take a negative viewpoint. You must develop the ability to shut out this negativity and go your own way. If you listen to all of these people you will never achieve your dreams.
Do The Necessary Ground Work
You need to be prepared to do your homework and assess how you think things will change in the property market. Will house prices continue to rise or is there a slump around the corner? Will Government changes affect your investments? Is the demand for rental homes likely to be strong in 5 or 10 years? If young people can no longer afford to buy houses will the Government do something drastic like build lots of low cost housing? If this happens how will it affect your business?
Where Does The Biggest Profit Potential Lie?
Think about where the most profit potential lies and how this will change over the years. Right now the buy to let market is growing strongly but will this still be the case in the next 5 years? If you believe that this market will continue to deliver then think about a high yield portfolio of rental properties.
How many BTL properties will you need to achieve your financial goals? If there are not many opportunities for BTL properties in your target area then research a new area and start operating there. Do not let anything hold you back.
Know The Numbers
You cannot take a true calculated risk unless you do the numbers and full understand them. You need to calculate all of the costs involved and then add a contingency factor as things always go wrong. Know what the local rental income is going to be and the capital growth rate of the property that you are intending to purchase.
Risk taking can be very rewarding and it can also backfire on you. The more information that you have, the more likely the calculated risks that you take will pay off for you. It is time to stop playing it safe and increase your risk taking to enhance your dreams of financial success.