Buying property to let III

Real Estate seems to be a good decision these days, for those investors seeking for safety rather than immediate gains. Investors tend to maintain their investments in areas that they know better. Stock exchange investors prefer to stick to their usual investments in that market rather than diversifying to other segments like Real Estate.

Diversification, if well managed, means a safer way of investing.

I recommend to have a balanced mix of types such as investments in Euros and US dollars for example.

This seems pretty basic but some people that recently contacted me had not paid any attention to this very basic fact.

There are many programs in the market for sophisticated investors to combine several types of investments according to each individual risk appetite.

Those theories have been used for several decades and they are effective. Nobel Prize Harry Markowitz back in the sixties generated his theories and tools to assist investors to create balanced optimal investment portfolios.

Some investors do not need to reach those levels of sophistication but rather to stick to basic principles such as definition of investment strategy (Return, time, and risk appetite/aversion, etc) and diversification.

For those deciding for Real Estate as a safe place to put their monies. We may recommend to define their level of investment and location

Combining these two simple variables is the key for a successful investment decision.


 

Buying property to let II

Again property is normally a good safety net for savers worried about the future economic developments.

Although there is no guarantee of profits in the short term, my experience is that, by buying property is a sound and conservative strategy. If you are looking for returns in the short terms, you should be looking at other alternatives like the stock exchange or commodities (gold, oil, etc).

In the case of property your first analysis should be prices. How are they if you analyze a twenty or thirty years trend. 

Even in the case of buying when prices are relatively high, there are always good opportunities since, sometimes sellers are there with the immediate need to sell for different reasons. In any event it is more convenient to buy in a buyers scenario, that is when prices are going down, there is more offer than demand and the buyers kind of fixes the market dynamics.

Take a look at Spain these days. The market is pretty inactive. The stock of houses and apartments is high (one million two hundred  thousands of vacant units) The market moves approximately three to four thousands units per year. In this type of market buyers have the chance to make very good transactions simply by picking and choosing.

I would suggest any interested buyer to have a look at this market during 2012 since banks will have to download a number of units they still have in their books. Moreover sellers have been holding the horses for a while but eventually they will have to end up selling at lower prices next year 

What to do with your money

In this crisis scenario probably the best recommendation is to be conservative. These comments are for non professional investors but for the regular person with savings and not knowing what to do with his or her savings.
A few weeks ago while in Uruguay someone asked me what can I do with 180.000 dollars which are my "life savings". My recommendation was to buy real estate. Her reaction was a little bit of disappointment. That person was not used to this type of transactions so her reaction was absolutely normal.
Clearly buying a house or an apartment is more complicated than depositing her money in a bank or a cd instrument.
It is also true that once decided to buy, there are many webs and places where to get help in order to make a good selection once you have decided the country where to invest. 
I will try to help those interested in buying to let as an alternative investment. This is based in my own experience in five different countries like the USA, the UK, Spain, Chile, Argentina and Uruguay.
Just one tip, if your choice is the UK, see the web http://www.thisismoney.co.uk/. They give you the best 100 places in the United Kingdom where to buy and let, getting a net return between 3 and 4,5 % p.a.
In next comments we will consider more aspects aimed at making a good decision when buying real estate.