Saturday, 24 August 2013

Real Estate and Value Investing

1.  Most people purchasing real estate seem to believe it is possible to get a "good deal."

2.  By this they embrace the possibility that price and value are different things, suggesting that when it comes to home ownership, people intuit the core quality of value investors.

3.  By staking a modest down payment (often 10 to 20 percent), much of the population exploits the leverage afforded by putting more assets to work for them.

4.  Except for speculative fever in select times and places, real property values rise reliably, making such an investment a reasonable vehicle to increase net worth.

5.  Owners have been able to tap the increased equity value in primary residences in recent decades by using home equity vehicles dotting the market.

6.  Low-interest-rate-environments spur refinancing transactions that, by lowering debt service obligations, free up cash flow as well.

7.  Buying secondary homes for use as vacation getaways or rental properties has also become more attractive to many families, no longer the preserve of the upper echelons.

8.  Particularly in periods of low interest rates and sagging stock market returns, these markets offer attractive value investments.

9. Apart from the additional concerns of family needs and psychic rewards, the basic principles of valuation apply to these vehicles.

10.  Paying a price reasonably below estimated value remains important.

11.  Avoiding excessive leverage is akin to avoiding margin trading on equities.

12.  Patience is likewise valuable.

13.  Another advantage to home ownership is that the owner is the manager - he runs the home, maintains it, determines required reinvestment to maintain and improve its value, and so on.

14.  Value-minded investors are sure they can do these tasks, or else turn the reigns over to someone who can.

15.  These points go doubly for vacation or rental properties that might present logistical problems.

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