The Myth of Property Hotspots
I don’t believe in property hotspots!
That might sound like a stupid statement coming from an experienced investor but all my training & experience in property tells me that being a “set and forget” property millionaire is not about hotspots but about fundamentals.
Let me explain:
A property hotspot is somewhere where you can invest and in a very short space of time make a disproportionate return when compared to other areas you could have chosen to invest in.
My definition of a hotspot is simply ‘good fundamentals surrounded by salesmanship’
What l mean by this is that if you understand the basic fundamentals of property which is just basic economics and human nature then you back this up with good solid research you can pick a hotspot before it becomes a hotspot.
Now granted, something like the announcement of the Olympics in East London can cause an immediate hotspot. So no amount of research could have forseen this and those that claim they wisely advised you to invest here prior are simply gamblers that got lucky so beware.
Now my point is this… If we assume that property… all property, will double every 7-10 years (and this is the only assumption that l make in building a portfolio) then assuming this it actually doesn’t matter where or what you buy because in 7-10 years you have doubled your investment.
Take this concept one step further and you can effectively buy any property anywhere with NO RESEARCH and still make money.
So then it stands to reason that the only reason we do any research is to try and shorten the time for a property to increase in value or double. Now l am not subscribing that you do no research, all l am saying is that you have a choice of how much research you will do.
My personal strategy is to do enough research at a macro level of the area, then check the valuation and rentals of the area and spend the rest of my time thinking how to be structure the deal and what strategy is best. My level of research is based purely on comfort level.
My opinion is that my energy is focused on the things l can control like the negotiated discount or profit at the purchase or the deal structure. These things l control, I do not control whether regeneration happens or not, where the council puts a park or anything else. So whilst I acknowledge these, I do not pay them much attention.
It’s because of this control issue that l don’t get bogged down in detail. I get a real feel for the area and providing it is positive I will move onto the next steps.
So if you would like to chase hotspots be prepared for a lot of work in research, investing and trading property. If you would like to be a “set and forget” property millionaire then do what is necessary to make you feel comfortable (ie pass the sleep test) with your investment and go about investing. In around 2 years you will be able to restructure or refinance and continue investing.
Live with passion,
Brett Wood
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