Profiting with Safe Investment Properties
The layperson, or a non-businessman, has his or her best chance at money money through the field of real estate. This is because real estate is the easiest field in which you can acquire other people's money, and it is the field in which a total loss of value is least likely.
Speculation versus Investment.
Investment and speculation are quite different from each other. One relies on hard facts, and the other relies on chance and good guessing. Most so-called investors are actually speculators, even though they think they are investors. These people often spend a huge amount of time "researching." Research to them is reading market conditions and the opinions of experts and then trying to predict the future prices of their investments. A real investor's only concern about the future, on the other hand, is the price dropping; he or she wants to guard against this. So, a real investor looks for two things: safety and profit. If either of these things are not present and are not assured beyond a reasonable doubt, then he or she will not consider it an investment, but a speculative operation.
Safety
Property has two values assigned to it: the intrinsic value and the price. The intrinsic value is what the property should be priced, while the price is what the property is actually priced. Investors are more concerned with the intrinsic value than the price. They watch the price until it drops significantly below the intrinsic value, and then they buy the property. Afterwards, the price no longer concerns them. If a market is so inflated that there are no prices below the intrinsic values, you should move to a different area, as speculation is the only strategy available in those areas.
The price that the property is bought at must be significantly below the intrinsic value, otherwise the investment is no good. Remember that the intrinsic value is not a fixed value, but a general ball park. If one buys something in a ball park substantially below the intrinsic value ball park, then one is sure of getting a good deal.
Eighty percent or below the intrinsic value: this is the criteria we use when looking at price to determine if we should buy the investment property or not. This will give us a margin of safety. If the price of the home should drop in the future, we have a twenty percent buffer before we feel any impact. Sure, the price may be lower than when we bought it, but remember that we are concerned with value. If the price does drop more than twenty percent, the impact is lessened by our safety barrier.
We must not rely on appreciation, for this is speculation. Predicting the future is impossible, as nobody is a fortune teller. Instead, we should use a strategy that assures us of a profit.
Find a home with a solid, firm foundation, but be sure it is in need of surface level repairs. Subtract the price paid for the home per square foot minus the new construction cost of comparable homes per square foot. This difference should be at least double the repair expense estimate. When we do this, we can buy and repair the property. For every dollar we put into it, we get two or more back when we sell. This assures us of a profit, and our margin of safety assures us of safety. If we follow these strategies, we are true investors. - 23211
Speculation versus Investment.
Investment and speculation are quite different from each other. One relies on hard facts, and the other relies on chance and good guessing. Most so-called investors are actually speculators, even though they think they are investors. These people often spend a huge amount of time "researching." Research to them is reading market conditions and the opinions of experts and then trying to predict the future prices of their investments. A real investor's only concern about the future, on the other hand, is the price dropping; he or she wants to guard against this. So, a real investor looks for two things: safety and profit. If either of these things are not present and are not assured beyond a reasonable doubt, then he or she will not consider it an investment, but a speculative operation.
Safety
Property has two values assigned to it: the intrinsic value and the price. The intrinsic value is what the property should be priced, while the price is what the property is actually priced. Investors are more concerned with the intrinsic value than the price. They watch the price until it drops significantly below the intrinsic value, and then they buy the property. Afterwards, the price no longer concerns them. If a market is so inflated that there are no prices below the intrinsic values, you should move to a different area, as speculation is the only strategy available in those areas.
The price that the property is bought at must be significantly below the intrinsic value, otherwise the investment is no good. Remember that the intrinsic value is not a fixed value, but a general ball park. If one buys something in a ball park substantially below the intrinsic value ball park, then one is sure of getting a good deal.
Eighty percent or below the intrinsic value: this is the criteria we use when looking at price to determine if we should buy the investment property or not. This will give us a margin of safety. If the price of the home should drop in the future, we have a twenty percent buffer before we feel any impact. Sure, the price may be lower than when we bought it, but remember that we are concerned with value. If the price does drop more than twenty percent, the impact is lessened by our safety barrier.
We must not rely on appreciation, for this is speculation. Predicting the future is impossible, as nobody is a fortune teller. Instead, we should use a strategy that assures us of a profit.
Find a home with a solid, firm foundation, but be sure it is in need of surface level repairs. Subtract the price paid for the home per square foot minus the new construction cost of comparable homes per square foot. This difference should be at least double the repair expense estimate. When we do this, we can buy and repair the property. For every dollar we put into it, we get two or more back when we sell. This assures us of a profit, and our margin of safety assures us of safety. If we follow these strategies, we are true investors. - 23211
posted by X - Men @ 3:33 AM
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