How to work out your investor profile

How to work out your investor profile

If you are wondering where you should invest, you need to know what type of investor you really are then you can match your profile against the myriad opportunities and create a clear path forward. Nick Shinner advises on how to choose the location that best suits your personal circumstances On average, people in the UK wait until they are 45 to take control of their finances. If you are under 45, nows your chance. If you are over 45, better late than never!

But where do you start? Firstly, decide how much of your cash and/or equity you want to invest in property (asset allocation, if you want to sound good down the pub!). I would be breaking the law if I tried to do this for you, you need to talk to someone qualified (an independent financial advisor) or have a go yourself. Once you have an idea of the amount of cash or equity you have to spend, there are key questions you need to ask yourself...

  • Are you OK with high risk, or do you need to sleep well at night? (Attitude to risk.)
  • Do you hate the idea of using someone elses money to make you wealthier? Or do you fancy the idea? (Attitude to borrowing.)
  • Do you want somewhere for your own pleasure as well as an investment?
  • Which is more important to you, capital growth or rental return?
  • In terms of flight time, how near or far away do you want the property to be?
  • What do you really want to achieve, and on what time scale?

As well as the above, you should also think about how important rental guarantees are, about running costs, if you want to ask for a discount, and if youre happy buying off-plan. Once you have created your own profile, it is worth summarising your objectives and strategy in one or two sentences, creating your own personal plan. For example "Using X,000 I want a portfolio of five off-plan properties in high-risk, high-growth areas where the rental return will cover mortgage payments and I can use at least one of the properties for holidays."

Now comes the fun bit! Research the range of countries where you could invest and then match them against your profile. There is a range of information you should research but essentially you are looking at four areas:

1.What are the fundamentals that are going to drive capital growth?

2.What is the level of risk in any given country, and is it over or under-valued?

3. Does the finance available, property prices, buying costs and rental yields make it financially viable?

4.How strong are the resale/rental markets?

Once you have a country in mind, get down to specific regions or locations, and then find out what is available to you. If you are struggling, then either that country is not right for you, or your personal objectives are not realistic and need revising. If your strategy is to stretch your limited cash as far as possible, then your decision on which country will be largely driven by the need to find more innovative finance deals. For example, your search could uncover an opportunity in southern Cyprus with a 90 per cent mortgage and ten per cent deposit payable over two years. Or in Sofia, Bulgaria, where there is 100 per cent finance available and guaranteed tenants for suburban houses. If your strategy concentrates more on rental return, then you might uncover a ten-year guaranteed rental return in Thailand, with a minimum ten per cent net return, or over 15 per cent returns in the United States.

Ultimately, you either commit to following the path outlined in this article, or you find someone who can do it for you. That is the crucial decision for you to make. The mistake many people make is to tread the middle ground they have enough information to confuse themselves but not enough to make an informed decision as part of a clear strategy. Consider the advice from one great (shares) investor. When asked what the average investor should do, he replied: "The average investor should find a great investor to do his investing for him and then go and do something he really loves to do".

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A Place In The Sun