“The most common mistakes”, by Mariano Capellino for La Nación Newspaper

16 Sep '19

The main pattern of behavior shared by real estate investors is that they buy a property and then they decide not to sell it. Even though the acquisition is key, “the trap” is in the sale process and there are several reasons for this. One reason is to believe that the value of the properties is always rising and that it never drops. In other words, they never measure the yield obtained or its potential and they do not compare it with other investment alternatives. So, they are making a mistake as they are failing to maximize the return on capital. Now, by implementing an active management approach, it is possible to increase ten times the capital invested in 20 years.

Another mistake is that they fail to distinguish between real estate investments and property for their own use. The first one is aimed to make money, the second one is for enjoyment. Culture is another key factor. Sometimes, acquiring a premium asset in an exceptional location such as Puerto Madero is good business, but also, there are moments when buying in medium/lower class zones is convenient.

The real estate business is not about location but timing. There are also people who believe that the real estate investment is always local or always international, but changing the types of assets and markets is fundamental. On the other hand, there is a frequent behavior of remaining stuck thinking about the exit cost when, in fact, you should think about how much you are not earning if you don´t sell. Sellers who intend to obtain a price higher than the actual value of the asset may lose its chance to exit at the best moment and at the most convenient price. By keeping the asset, there is a negative return when the market falls. In a nutshell, in order to obtain return it is necessary to have the property during the phases of expansion of the market – periods of 4-5 years.
 
Then, you sell and acquire another property during the recovery phase, changing the type of asset, city or country. Otherwise, simply buy the asset that you wish regardless of its price and enjoy it!

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Source: La Nación. 

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