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Property Investment Ė Myth Busting Part 2

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By : Stephanie Sowerby    99 or more times read

  1. Subjective evidence proved that this particular investment was a good prospect

    We have all heard victims of the media say that we shouldnít believe everything we read. I canít stress the reality of this enough. The media tend to exaggerate stories in order to get readers and, letís face it, everybody loves a good scandal or fabulous new product. The recession has caused a huge fall in property investment companies but equally some companies have seen sharp rises in business. As with anything finding a good, honest company to exchange business with does take some due diligence but it should be understood that a few companies bad mouth others for the sake of business. These are hard times and some people do get desperate which will reflect badly only on themselves when all is said and done.

  2. Below market value is too good to be true

    Many of these specialist companies who deal with below market value buy their properties in bulk from people who either canít afford to complete the projects and need a way out or off the council who simply want projects taken off their hands due to cut backs and the recession. They may also buy foreclosed properties off the bank and get a discount for buying several at once.

    There are a few companies who have really flourished throughout the recession especially if the company is cash rich. When a company lends to obtain these types of properties there is too much debt involved especially if the investor then lends to buy off the developer.

    Now just because it says below market value on the tin doesnít mean that you get instant profit. But what you do get is instant equity. In the long run this can equate to profit however this is dictated by the state of the market. With this said if you bought a property at the full value at a certain time consider that you will definitely not make a profit from your investment should the market deteriorate.

    For example if you bought a property at £100,000 and in a year the market had depleted and the house value dropped, your house could end up being worth only £90,000, losing you £10K worth of equity. In the same instance, if you bought a property below market value of £65,000 but it was worth £100,000 upon completion, even though there was a dip in the market instead of losing £10K youíd still be in equity of £25K.

    If you just want a quick buy to sell property, below market value is probably not for you because more often than not the best deals can be had on off-plan property. With this obviously there is a waiting period from the time of reservation until development completion.

    With talk of the property market depleting and property devaluing it should be taken into account that location is everything when you are considering a property investment. City centre locations will help considerable especially if there are other developments occurring in the city.

  3. Emerging markets are a sure win to get that profit fix

    Before you go believing everything you read, just remember to take due diligence with regards to alleged emerging markets. We are still in a recession after all. Iím sure youíve heard lotís about Greece lately and Dubai arenít getting the response they wanted from all their new developments since the noveltyís worn off a little.

    Most claims about emerging markets are based entirely on speculation particularly by promoters who, to be fair, create quite convincing arguments. This is not to say that there isnít money to be made by investing in land early on in regions with a high potential growth margin. The types of investors who have gained by doing this in the past have sold their land to high profile developers. Failures are less documented, however, making it more difficult to do your homework when it comes to an emerging market claim.

    It is far better therefore to invest in locations of better sustainability such as cities in more economically viable locations, like Manchester and Liverpool where there is already considerable development and high populations.

These are just a couple of myths surrounding the property investment industry. Before you choose to invest in property be sure you research into any myths you may have heard and don't just rely solely on them because you may lose out in the long run.
Stephanie Sowerby for Fresh Start Living.

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