Friday, March 6, 2009

Conspiracy of Location, Location, Location !

Have you ever heard of someone telling you the 3 most important things in property investment ?  Then he repeated saying the word "Location" 3 times ?

Well I have!  I have heard that so many times since so young that it was imprinted in my head without proper judgment.  You know, say the lie 100 times and it would become the truth. 
A lot of people got into real estate and their first few years ended up paying high lesson fee TOTALLY WASTED on this so call principal Location, Location, Location !  A Conspiracy !

First of all, have you ever heard seller saying the location is not that good ?  And therefore they are selling the property at a lower cost ?  - - -  N O ! - - -  Every location "can be" a good location.

Do you know that sometimes property at the right side cost much higher than the left side even though at the same location, same build up, same type of buildings ?  - - - Yeap !  You Bet ! - - - Usually by 2 different developers.

Why is there always a few units in the Golden Location not able to sell out or always make a lost in resell ?

If Location is really the Number 1 factor in property investment, all the above should not happen at all.

This miss conception is originated from the developers.  Whenever developer launches new projects, they will make a big deal about the location.  No doubt at the time they promote the project, the location could be a great place.  However, eventually whatever highways promised earlier may not be built later.  Sometimes even after the high way is built, the effect is negative rather than value increase.

Even if nothing happens to the original location, but when the same developer is launching another new project, guess which is the better location ?  Yeap !  The new one !  Not your older location.

Hence, this location factor is purely a speculation in real estate investment.

Like any investment, what really matter is its real worth and its current priceIf the price is lower than its worth, its a good buy.  Else its a good bye !

No doubt location is a factor, but it is NOT an important factor at all !  Most of the times it is merely a Personal Flavor factor.

Prime location property is easier to rent and sell out but more expensive and usually not available.

Secondary location is cheaper and readily available but harder to rent or resell out.

So give and take, the pros and cons of different location even out each other and do you need to compare properties between two locations ? - - N O ! - -  Not really. 

Different locations carry different characteristics and require different investment methodology.  But the principals remain the same ;

1.  Identify, calculate and verify a property's real worth
2.  wait and buy the property at big discount
3.  ensure continuous net cash inflow ie. Rental - Repayment = positive
4.  appoint experience management or agents at that particular location

So if you purely treat real estate as an investment, you don't really need to worry too much about the location as long as the 4 steps above are strongly adhered to.

There are only 2 decisions that may be affected by location ;

1.  Get a location near you or a location that you love personally.  That way, should the investment goes south, you may temporary enjoy the non tangible personal qualitative returns - a personal flavor as mentioned above.

2.  Location can be the reason NOT to buy a property, but it should NEVER be the reason you put money into it.

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