How can I avoid being a casualty in the next property crash?
In this video below of a radio interview with world renown Robert Kiyosaki, he explains that investment is a lot like monopoly. He warns that, like in Monopoly, we should not aim for capital growth, but set as your goal rental income.
He says some very harsh things, in an investment climate where the USA is still reeling from the sub prime crash.
The U.S. subprime mortgage crisis was a nationwide banking emergency that coincided with the U.S. recession of December 2007 – June 2009.It was triggered by a large decline in home prices, leading to mortgage delinquencies and foreclosures and the devaluation of housing-related securities. Declines in residential investment preceded the recession and were followed by reductions in household spending and then business investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines.
As you can read in this Wikipedia excerpt above the hardest hit areas were, what we in South Africa would call the “prime areas” – The areas where high household debt was prevalent. Typically people flock to live in the prime areas, living above their means in an effort to keep up with the Joneses.
Winners and losers
The “flippers”, those people who buy property at a price in the hope of selling it off quickly at a higher price, make a lot of money in these areas when the going is good.
When the market turns they loose! Essentially they play the game of “winners and losers” – let’s call a spade a spade, its gambling!
The wise money aims for rental income
When it comes to property investment, the “wise money” does not gamble. The “wise money” aims at buying property to provide a service to those who need homes near their place of work.
Rental income growth is secure when you buy property with this in mind and don’t get caught up with the urge to buy in the “best areas” Locatoin-location-location, doesn’t mean buy in the best areas. It means take careful note of location, because through location selection you stand or fall as an investor.
I have one caveat
The opposite end of this Capital gains vs rental income spectrum is investing in low grade (or degrading) areas. These areas offer very little rental growth and poor quality of tenants.
Below is a very enlightening, and rather bold chat with Robert Kiyosaki;
Grab a cuppa, sit back and enjoy.
I hope this made you think twice before making your next investment and ensure that its a good investment property, not a Ponzi scheme gamble. .
Please comment below and share freely.
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