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By Javed Khattak

CEO, Zisk Properties

TODAY'S OTHER NEWS

Fearless investing: how property investment behaviour is changing

2019 brought with it much uncertainty, with falling property prices leading many to fear the start of a property price crash.

Despite significant events such as Brexit contributing to the panic, the reality is that the UK property market still remains a strong and resilient investment consideration; it is simply perception that prevents individuals from taking the leap.

As we embark on a new decade, Javed Khattak, a qualified actuary, C-suite executive and serial entrepreneur who co-founded crowdfunding platform Zisk Properties, discusses his views on why property investment behaviour is changing and why investors need to overcome their fear and get stuck in.

Fear can be paralysing, particularly in the investment world. For those who are extremely risk-averse, the more uncertainty they are faced with, the more they are likely to backtrack from a potentially profitable investment opportunity.

Usually, this is caused by a lack of market knowledge or understanding of the forces at play. It can also be caused by paying attention to the wrong influences, such as over-hyped media reports which are designed to grab attention and sell column space, not provide the most credible, accurate investment advice.

What this does mean is that plentiful opportunities exist for a select few who are able to drown out the noise and focus on the real and present opportunities.

Any expert on combatting fear will tell you that the secret to overcoming it is knowledge. The more you understand about a situation, a circumstance or a process, the better equipped you will be to make decisions that are based on facts, or at least the most likely outcomes.

Of course, investing in property does not guarantee returns of any kind, but with the variety of asset classes and investment types available, it is actually one of the most reliable and resilient forms of investment you can make.

Even with Brexit, the impact hasn’t been significant and now that the UK has left the EU (moving into the transitional stage), we have already seen signs of positive market sentiment. You can be as risky or as ‘safe’ as you like in property, you simply adapt your investment portfolio accordingly. 

When it comes to property investing, knowledge can be gained through education, mentorship and capacity building, providing access to little-known services and mechanisms that can help them to make smarter, more calculated investment decisions that the vast majority of investors would simply be oblivious to.

Understand your motivations 

Understanding your underlying motivations for investing is essential to formulating the appropriate strategy. 

Ask yourself the following questions:

  • What are your current financial circumstances?

  • How much are you willing to invest?

  • Over what time-frame do you want to invest?

  • Do you need an immediate/short-term income or is this a long term investment?

  • Are you looking to invest in a specific property or property type or are you looking to build a diverse property portfolio?

  • How risky are you prepared to be?

The answers to these questions will help to determine the best approach and will direct you towards investment options which best fit your financial needs as well as your level of risk. Whatever your desired outcomes, the right property investment solution is out there, you just need to know where to look. 

Creating a diverse property portfolio

Whether you are at the higher or lower end of the risk spectrum, it is always advisable to have a diversified property investment portfolio; one which ensures that all your financial eggs aren’t in one basket alone. A diversified mix will include higher and lower-risk investments (within the thresholds you select), providing varying levels of returns to give you more stabilised growth within your selected risk thresholds.

Investing too much in riskier property types could promise high returns, but it is also much more likely that your investment can be lost or adversely affected.

Combining a range of risk levels means you’re unlikely to hit those peaks, but you’ll almost certainly avoid the potentially devastating lows too. 

Diversification in property can cover a broad range of factors including:

  • Location

  • Industry Sector

  • Property Type (commercial, industrial or residential)

  • Return Type (capital growth focused or  rental yield focused or both)

  • Investment Term

  • Investment Amount Required

  • Risk Threshold

  • Investment Type (including newer approaches such as property crowdfunding platforms, property funds, REITs (Real Estate Investment Trusts) or shares of companies operating in the property sector)

There is no set formula for achieving the perfect portfolio, with some investors swearing by theoretical approaches and others simply following their gut.

Interestingly, there has been some research showing the outcomes of both approaches being broadly similar, suggesting gut feeling (supplemented with good knowledge and due diligence) can be as effective as professional investment managers.

Essentially, investing is a very personal choice and you have to go with whatever approach feels best for you. 

Becoming a fearless investor

As I alluded to earlier in this article, the tools that enable fearless investing have remained hidden away from the mainstream public, preventing them from taking the leap into profitable property investing.

One of the first lessons to be learned is that investors’ combined 'opinions' or 'sentiments' is what drives the markets, and uncertainty will prevail for as long as it is tolerated. The trick is to see beyond this and focus on the long game; the reality is that the UK property market has consistently performed well over time.

Putting the Brexit saga aside, the UK property market continues to be an attractive and profitable investment option. Those who are willing to adopt a more fearless attitude to investing will be able to take advantage of the real opportunities which are present right now, putting them in the perfect position to capitalise on the inevitable; ultimately, property prices will increase.

*Javed Khattak is the co-founder and CEO of flexible property investment platform Zisk Properties 

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