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Dr Mehmet Yildiz
Useful Lessons That I learned About Real Estate Investment
2021-01-30
Many years of real-estate investment taught me five valuable lessons. Unlike the stock market, real estate investment provided me with the best long-term investment outcomes. I want to share lessons and useful perspectives based on my decades of experience.
I started my investment journey at a relatively young age with limited knowledge and no experience.
My knowledge came from books, magazines, talk shows, and anecdotes from friends.
Majority of investors in my circles talked about stocks and bonds. Since many people were passionate and adamant about stocks, the conversations encouraged me to try the stock market as my first investment.
Despite following so-called best practices, I miserably failed after several attempts. I understood that the stock market was not my style, did not align with my skills, and did not match my investment goals.
The next alternative for me was real estate.
My initial confidence started with an insightful quote I came across from Franklin D. Roosevelt. This quote made the real-estate investment compelling for me:
"Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world."
I gained a realistic perspective from entrepreneur Sarah Lucinda Beeny presented UK property shows such as Property Ladder, Property Snakes and Ladders, Streets Ahead, and Britain's Best Homes. Sarah pointed out that "In any market, in any country, there are developers who make money. So I say all of this doom and gloom, but there will always be people who make money because people always want homes".
Keeping these useful viewpoints, I wanted to start somewhere and give it a go.
After having sufficient deposit from my full-time job, I applied for a home loan in the early 1990s.
The fundamental principle I learned from books and mentors was the motto of "location, location, location".
Keeping this motto in my mind, I started searching for affordable houses in well-rated suburbs.
All houses I inspected lacked something in my viewpoint. Nothing resonated well with me. One day, when I was reading an article, I learned an insightful point. My approach was wrong. I was naively looking for my dream home.
My focus on an investment property was using the wrong criteria. I based my set of standards for my personal taste on emotions. The article highlighted we need to be logical rather than emotional when making a real estate investment.
Logic versus emotions was a piece of eye-opener advice. It saved me from analysis paralysis.
After finding a reasonable property in a pleasant suburb, I attended my first auction. The auction was exciting. It triggered many emotions in me. I was not ready to cope with these emotions but went with the flow and gut instincts.
I made a mistake in the auction process from hindsight, but even this mistake offset my long-term gains in this specific property.
Because of a competitive atmosphere for the auction, I made the last bid with around $3.000 more than the property's value. It was a lot of money during that time and concerned my partner and me.
However, luck was on my side. The next year, the property doubled its price. It was unbelievable.
This excellent value increase gave me strong confidence to pursue real-estate investment. I attended many auctions at the weekends and stayed silent and neutral till the end of the auction.
When I noticed an actual value, I confidently made the last bid without hesitation. Yes, I lost a few thousand dollars for the year, but they all offset in a few years.
The next point I focussed was the look of the property. I learned that the look could be changed easily with some renovation investment which is also tax-deductible. The important criterion in my decision-making process was to ensure the property was structurally sound.
This approach helped me to continue with the real estate investment for many years. My portfolio grew over the years. The rental income of each property paid the loan, provided additional income, and more importantly, capital gains.
Unlike the stock market, real estate investment worked very well for me. I have no regrets. They helped me semi-retire with confidence.
There were ups and downs, as usual. For example, some of my properties lost value in the 2008 recession and economic crisis, but it picked up again in a few years.
During the decades of real estate investment, I learned the following five critical lessons:
1 - Taking a risk and focussing on the long-term goals is vital.
2 - Removing emotions and looking at from prospective tenants for investment property worked well.
3- As the motto goes, the location was one of the crucial factors.
4- With a minimal deposit, leveraging banks' home loan offerings for growth was the best strategy.
5 - Buying bad looking but structurally sound property provided the best return in investment.
I am not rich but satisfied with my investment that aligned with my lifestyle goals.
Thank you for reading my perspectives.
I hope my experience can provide you with useful perspectives.
If you enjoy this article, you might also check my other self-improvement and leadership articles published on News Break.
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