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Decisions, Decisions to Make about Property Investment

written by: theMallorys•edited by: Jason C. Chavis•updated: 6/28/2011

Decision making in property investment is a process that takes time. If you invest in the wrong location or the wrong type of property, it can end up costing you more in the long run. You’ll want to weigh your options carefully before making this important decision.

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    1150489 74226404 There’s more to decision making in property investment than you might think. You have to weigh many key decisions. If you make mistakes, it could cost you your financial future. You shouldn’t be fearful about owning a property investment, but you should be wise and think through the decision making process carefully.

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    Decision #1: Location

    If you bought an investment property in Detroit, Michigan in the United States before the recession, you would be in a terrible position today. Some houses that were once worth hundreds of thousands of dollars are worth only a few thousand, if even that. People want to get rid of their investments as quickly as possible, and are willing to sell for next to nothing, because the state was among the hardest hit economically. There are infamous news stories of property being sold in Detroit for $1.00. The moral of the story is that when it comes to decision making in property investment, it’s all about location. You may not be able to predict a recession, but you should have enough historical data to know where not to buy. Choose a location where housing prices remain steady no matter what the economic situation, and one that isn’t reliant on the success or failure of one industry.

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    Decision #2: Types of Property

    You may not want to be a landlord to many tenants, or you may enjoy managing property with multiple tenants. Being called in the middle of the night to handle a major repair job may not be your cup of tea, but you may be skilled with handyman jobs or have a good relationship with someone who is. Different types of properties require different duties and responsibilities, and you have to determine what you’re willing to tolerate. Your own family needs should be considered as you make this decision, as you may not want to be interrupted often by many tenants who need you to deal with their apartment problems. Obtaining and renting land is another option, which requires the least amount of your attention.

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    Decision #3: Priority of Finances

    Property investment is the most expensive item you’ll buy after your own home in most cases. You’ll have to decide whether it fits in your overall financial plan or not. Some people try to force it in, by taking on debt. That’s not a wise idea. Let’s consider the earlier Detroit example. Some of those owners had mortgages worth hundreds of thousands of dollars and had to sell the property for only a few thousand dollars. They were upside down in their mortgage, which will haunt them the rest of their financial lives. That’s the case with many homes across the United States, which led to the housing bubble bursting.

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    Decision #4: Compare Other Investment Options

    Perhaps your decision making about property investment will lead you to buy another form of investment. Property investment may not be your best option. It depends on your family goals, the state of the economy and the market condition. Investing in a small business venture so that you earn more money may be a better decision for some time. Improving your primary residential residence to improve its value or to add more living quarters for an elderly parent may be a higher priority. List the pros and cons of all of your investment options before you make a final decision.

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    Don’t rush your decision making. Property investment can affect your entire economic future and you will have regrets if you make the wrong decision.

    Image Credit: Svilen Milev