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The Property Investor’s Big Three

30 September 2014 Badenoch Real Estate

When consulting with an estate agent about the management of their property investments most novice investors focus on short-term return. They want maximum income, minimum expenses. Most new investors are borrowing money and they and their managers become obsessed with immediate return because it’s often crucial to the ongoing survival of the investment. Stated simply: no rent = no income = no loan re-payments = no investment.

Experienced investors have three main aims: optimum income, optimum expenses and a focus on capital appreciation. They choose an agent who will optimise their income-to-expenses ratio over the long term and who has expertise to look after the big picture.

When the floor coverings in an investment property need replacing, buying the cheapest carpet will certainly minimise expenses at the time of expenditure. However if the carpet doesn’t wear well the saving may turn out to be less cost-effective in the long term than a carpet that was a bit more expensive but lasted twice as long.

Long term successful investors employ quality, experienced property managers rather than cheaper inexperienced property managers so that long term and short-term goals are merged into an overall strategy.

Capital growth is the culmination of the investor’s big three and it is often overlooked by inexperienced property managers with a narrow focus on management rather than investment. If investors hold their property for any length of time (which most successful investors do) capital growth becomes the most wealth producing part of the overall investment equation.

Only a quality experienced property manager will keep the big picture in view and advise the investor about events impacting on the growth of their investment. When selecting an agent to manage their property, investors should make sure the agency’s management programme includes an annual opinion of the property’s selling price.