Where the smaller investor should go

These days, there are many kinds of property investors, be it those retiring to the sun, looking to build up a retirement income or those seeking to constantly increase their portfolios and returns.

By definition, this last group, with their large portfolios and large margins, can more easily afford to make errors with some of their investments if this is counterbalanced by successes elsewhere. For a smaller investor, whoever, whose margins are smaller and who might be a new entrant to the market, good judgment is critical. For an established investor with many properties a bad investment among many good ones is a disappointment, but for new, small-scale investors it could be calamitous.

Yet where people choose to enter the property market, especially those overseas, can depend on all kinds of influences. A spokesman for property portal Off-Plan International said a common reason for investors opting for one or another country in large numbers was the media, saying: “People are influenced by the media and word of mouth, from investments that large companies have done.”

He added that by these means Spain property investment became very popular and now increasingly distant locations are gaining ground, a prime example being India.

But is simply following the media the right approach, especially for the small investor, who may need to think twice before copying large companies?

Not necessarily, it would seem. The spokesman pointed to certain factors that ought to be paramount in the minds of small investors. For example, in emerging markets, there is undoubtedly a calculation of risk involved. “The newer the market is, the bigger the potential is. But there is also a risk as well,” he advised.

Economic growth and the development of infrastructure were among other factors mentioned as crucial in emerging markets, but location was also a key. The Spokesman said that those who did not want to take risks with what could be most or all of their portfolio should take one simple route to success.

He said: “My advice for people if they are looking to invest in small value, one or two properties, is to look at capital cities within a country. They are more expensive than other parts of the country but you are not going to lose.”

All this, of course, may slightly lack an element of glamour or daring, but then investors should ask themselves what they are in the market for, Landlord Expert stated earlier this month.

It said the Times property guide with its five Rs was a sound way to assess any possible investment, starting with R for reason – with this section cautioning that by and large property is no longer the “holy grail” of investment except in high-risk markets.

The Times adds further advice which repeats that given by many experts: R for research, to help the buyer find exactly what kinds of market they are buying into and what they need to know, rather than being swayed by media hype. Connected to this is R for rentability, to establish how much potential a property really has to bring in a buy-to-let income. Then there is R for Ryanair, because cheap air access is “like a shot of growth hormone into the buttocks of stunted property markets”, followed, finally, by R for resale – the issue of future capital gain potential.

In short, declared Landlord Expert, it was a case of R for reality check. The Spokesperson for Off Plan International put it in a similar fashion: “If you are a smaller investor, in a place that’s been a hot spot for a year or two, you need to be careful where you invest.”

None of this advice, of course, suggests that the small investor should not bother, as if the bargain train has left the station and the ticket office is closed. But what it does suggest is that for those buying property overseas on a small scale, ensuring the very best possible preparation and advice is the very best way to ensure success.