Knowing the Risk, Planning & Knowledge
Fear of Risk
Everybody has a personal risk tolerance profile; some of us are quite comfortable with perceived risk while others are highly risk-adverse.
There are six main fears when buying a property:
- Overcapitalisation – that is paying too much, being ripped off…there are so many stigmas associated with estate agents and concern around agents ripping off undiscerning buyers.
- Buying a lemon – everyone fears their property underperforming in terms of capital growth when benchmarked against others in a similar area.
- Troublesome tenants – who either trash the property or don’t pay their rent.
- Vacancy problems – a common fear is having a property that’s hard to let with low or no tenant demand.
- Lifestyle sacrifices – if the property ends up costing more than initially expected resulting in extreme negative cash flow.
- Market crash – they fear a ‘bubble’ or downturn will strike as soon as they’ve purchased, creating a negative equity position.
All are legitimate fears but there are actions that can address every single one.
How to overcome this obstacle
“Firstly, an agent can’t rip-off a buyer if the buyer is educated.”
“Buyers should make it their business to have a firm strategy, know what type of property represents their desired strategy and, in particular, cash flow requirements, and should avoid problem areas and property types,”
“Buyers need to be aware of property values in the area they’re looking and if they are in doubt, either hire a professional or source a valuation report.”
Planning and Knowledge are key
Make a detailed plan so that you can understand your ultimate goals and can work backwards from it.
“For example, in how many years do you want to retire and on how much money? Once you have the answers you can assess how much you need in the future, what the shortfall is between the two, and how many properties you’ll need to buy and over what period to achieve your goals.”
If you would like to speak to an Independent Financial Adviser, have confidence your goals are understood call 1st Financial Foundations on 01908 523 420 and book your FREE initial consultation.
We’ll show you how you could:
- use what you have
- grow what you need
- release the flow of wealth
- never run out of money
- enjoy the life you want
