Will my property outperform the market?
- By itself, probably not.
The idea that buying a property in a “good area” or a “hotspot” is based on the notion that somehow, you can reliably predict future capital gains in a given area.
But a well-known factor of the human condition is the inability to predict the future. Financial Planners and Investment Advisors are always careful to state that “past results are no indication of future performance” – and they’re supposed to be experts!
A better question might be:
How can I ensure my property will outperform the market?
I’ve written before that property is not fungible. The fact is, despite most people’s perceptions, rental property isn’t a “passive investment” – at least, not if you want to prosper.
It needs to be approached and handled as a business in which you’ll be involved, although that doesn’t necessarily mean you have to do all the work.
A property, chosen in part for its “value-add” potential, might, when the value-adds have been done, rise say 7% in the same period as the surrounding locality rises by perhaps 5%. The price for the 40%-above-trend price rise would be attributable to the (often minor) improvements done by the new owner.
The two most influential keys to successful property investment are:
- an interested and involved owner
- a property manager who knows s/he’s working for the owner, not for the tenant.