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Should Emotion Play a Role in Property Investment?

Should Emotion Play a Role in Property Investment?

Deciding on a property investment can be an absolute minefield. One of the very first steps in the consultative process is to deconstruct objectives and goals and recognise emotional bias in property investment decisions.

Invariably the initial brief from potential investors revolves around finding a property providing the greatest return on investment. There are plenty of properties that can be acquired in the city for under £200k that have proven returns of in excess of 10% pa gross, but that this may be a house of multiple occupancy or a residential property that is located in an area that is likely to attract tenants on housing benefits. At this point the potential purchaser often explains that this isn’t really what they had in mind. It often transpires that actually they were thinking more of one of the 3-bedroom Peverell Park Road properties packed full of sympathetically restored period features. Returns on this type of property are more likely to fall around 4.5% pa gross.

There are so many tangible and intangible factors to consider when exploring investment options and there is usually an emotional element to the decision making process. There is nothing wrong with this, but it is important to understand natural human bias. The reason why many investors enjoy property is because they have an emotional affinity for what they purchase. If this were to be completely removed from the process, it would become a purely transactional process – no different from investing in a myriad of other financial vehicles. Property investment is rarely about the figures alone. It begs involvement and personal as well as financial investment from the landlord – generating enjoyment from the process is often an important factor.
As an advisor there is real satisfaction to be had from assisting the potential purchaser to better understand their financial and personal aspirations and finding the right property for them. There will always be those that focus purely on figures. Equally there are others who want a safe nest-egg providing moderate returns. Usually investors fall somewhere between these two extremes, but it is only by challenging pre-conceptions that the truth can be established and the correct investment advice can be offered.

At Martin & Co we very much pride ourselves on taking the time to have these honest and detailed discussions. We will always provide whole of market investment advice, not just sign-post to what we have available on our books at the time...