While the unexpected impact of the COVID-19 epidemic on economies around the world has shaken the backbone of real estate investors, having the right mindset is essential. 39; investor to overcome potential risks and stay the course.
Paul Wilson (photo), founder and CEO of Income2Wealth, said that investors must maintain their point of view and keep their head despite the worrisome headlines.
"This does not mean that you should be reckless. These events can be serious enough and require diligent consideration and appropriate action – the emphasis here is on appropriate," he said in a statement. exclusive interview with Your Investment Property.
Need for careful planning
In recent decades, the global economy has been subject to potential risks due to a multitude of challenges, from a coronavirus epidemic similar in 2002 to the financial crisis in 2008 Despite these challenges, Wilson said the economy has continued to function and has, over time, corrected.
"Adopt the philosophy that this too will pass," said Wilson.
Although investors have no control over market drivers, they must be able to respond appropriately to the current COVID-19 epidemic.
"It is important not to bail out at the first sign of rough water," said Wilson. "Decisions should not be made in a vacuum; weigh everything as a whole before taking your next action. Don't run the risk of isolating yourself from your own wealth creation goals."
When creating a plan, it is essential to have some flexibility to allow the mitigation of potential risks to come. Wilson said investors should always have a long-term plan for their wealth creation goals, how they will get there and when.
"Investments like real estate, for example, are an asset class for long-term growth – not something that you want to discharge in a year or two without having achieved capital growth at long term, "he said.
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Real estate investment strategy
Wilson believes that the markets will always experience a period of fluctuation, regardless of the forecast for the next five to ten years. The level at which things will fluctuate will be strongly influenced by supply, demand and market sentiment – all of which are uncontrollable variables.
"Whichever strategy you choose, it all ultimately comes down to the importance of understanding the purpose of the investment, as this will underpin the reason why you would choose a property. and one location in particular rather than another, "he said.
For real estate investors looking to adopt a traditional buy and hold strategy, Wilson said it was essential to select properties that would not strain their after-tax cash flow . A more active investor, on the other hand, could opt for a shorter term strategy or "enter, exit, rinse and repeat".
Investors should understand that capital growth should be the primary objective of wealth creation. Several factors must be taken into account when analyzing the capital growth potential of properties, including supply and demand, the identified growth drivers of employment and population growth, as well as public and private investments in infrastructure.
"It is important to know that there are always markets within the markets and with the uncertainty experienced at the moment, combined with the loss of wealth of certain investors who cannot maintain themselves to recover from their stock market losses following the impact of the coronavirus on the global financial markets, you might find, if you look closely, that there will be some motivated sellers out there trying to mix their portfolios " said Wilson.
For real estate investors, the COVID-19 epidemic could provide the opportunity to buy a house and expand their portfolio.
The cost of not investing
Wilson said current conditions provide people with the opportunity to invest. While discipline is important in decision making, it is also crucial in weighing the cost of not investing.
"By taking no action, investors may think they are cautious in protecting their wealth goals. However, overreact, sell or buy in desperation, or simply hoard funds or leave them stagnating in a bank account can be more costly in the long run than many investors realize, "he said.
This is especially true in the current environment of low interest rates. Wilson said the money people have today may not be able to keep up with inflation because their purchasing power is dwindling.
"Money sitting idle anywhere is never a good idea. It must be a living, breathing entity – moving and growing at any moment, otherwise it withers and dies Make your decisions clearly and based on the numbers – link this with your overall plan to make sure you anchor your investments on the fundamentals that will get you through turbulent times, "said Wilson.