| Some of the most successful stock
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| | get worse than average luck, or any
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| investors ever have based their investing
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| | number of
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| | unexpected problems occur.So when
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| principals on value investing. Investors
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| | estimating the value of a stock, you
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| such as Benjamin Graham, Irving Kahn, and
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| | useconservative estimates for
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| | earnings etc, to come up with the value.
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| Warren Buffet, have used value investing
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| | If your estimated value comes in at $10,
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| to build vast empires of wealth.Value
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| | then you don't buy the stock if its
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| investing was conceived by Benjamin
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| | currently selling for $9.75, because it's
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| Graham, and David Dodd, in their classic
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| | too risky,
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| book, "Security Analysis", written in
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| | and if your calculations are off, you
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| 1934. Although they were talking about
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| | wont be buying a bargain. If the price is
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| stocks,
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| there is still a lot to be learnt from
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| | currently $6 though, you might buy it,
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| value investing that can be applied to
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| | because you have a $4 margin of safety to
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| other
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| investment vehicles. This article will
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| | use if you estimated incorrectly.The
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| show four things that real-estate
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| | same principal applies to
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| investors can
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| | real-estate.Suppose you are looking at a
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| learn from value investing...1: *****
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| | deal, and you find you can buy some land
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| Investing vs Speculating *****In value
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| | for
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| investing, it's important to make the
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| | $100,000 and you can build a 4-bedroom
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| distinction between being an investor,
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| | house on it for $150,000.If new 4-bedroom
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| and being a speculator. In "Security
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| | houses in the area are selling for
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| Analysis", it is defined as this:"An
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| | $270,000 then should you do
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| investment operation is one which, upon
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| | the deal? Theoretically, it will only
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| thorough analysis promises safety of
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| | cost you $250,000 to buy/build with a
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| principal and an adequate return.
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| | sale at
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| Operations not meeting these requirements
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| | $270,000 so you should make $20,000
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| are
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| | profit.But that isn't much margin of
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| speculative".So, there are 3 things
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| | safety. What if building costs blow out,
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| needed for something to be an investment:
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| | and it cost
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| - You need to have done thorough
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| | more than $150,000 to build? What if you
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| analysis.
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| | can't sell it straight away so you have
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| - You need to be reasonably sure that
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| | some holding costs? What if the other
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| you won't lose your money.
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| | 4-bedroom houses in the area have much
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| - You need to be reasonably sure that
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| | better kitchens than you realized, and
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| you will make some money.In terms of
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| | you can actually only sell for
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| real-estate, this means that just buying
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| | $245,000?There are a lot of unknowns
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| and selling real-estate, does
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| | here, and because your margin of safety
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| NOT make you an investor. If you're
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| | is so small,
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| buying properties at random, just because
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| | unless everything goes right, you can
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|
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| | quickly find yourself making a loss.If on
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| there is a boom and all property is
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| | the other hand, 4-bedroom houses in the
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| going up in value, you are not investing.
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| | area are selling for $350,000 then
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| You are
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| | you have a projected profit of $100,000.
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| speculating.There is nothing wrong with
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| | You can afford for a lot of things to go
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| speculating, you just need to be aware
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| | wrong, and you can still make a profit.In
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| when you are
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| | the first case, if building costs go up
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| speculating, versus when you are
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| | by $50,000, the deal will cost you
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| investing.2: ***** Value vs Quality
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| | $30,000.In the second case, because you
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| *****Value Investing doesn't really have
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| | have a much larger margin of safety, if
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| any formulas, or rules. It is more of a
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| | building
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| theory,
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| | costs go up by $50,000 then you will
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| with some general principals. Because of
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| | still make a profit of $50,000.Margin of
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| this, there are many ways to do value
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| | Safety is a very important concept to all
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| investing, and different ways to apply
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| | investors, and all real estate
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| it.Benjamin Graham focused on buying
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| | investors should think about it if they
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| stocks significantly below value, with
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| | want to be around for the long term.4:
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| little
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| | ***** The myth of Risk vs reward
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| emphasis in the quality of the stock, in
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| | *****Conventional wisdom says that to
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| regards to their long term prospects.This
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| | increase your reward in investing, you
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| can be a useful strategy for a real
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| | must
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| estate investor, particularly when they
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| | increase
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| are
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| | your risk. This is often true, but the
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| first starting out, and need to build up
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| | Margin of Safety principal can turn this
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| equity fast.Warren Buffet still looks at
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| | around.When margin of safety is used, a
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| the value of a stock, but puts a lot more
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| | higher reward actually means a lower
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| emphasis on the
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| | risk!You can see this is the example
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| quality of the stock. He only buys
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| | above. The deal that is projected to make
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| stocks that he thinks have good long term
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| | $20,000
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| | is quite risky, whereas the deal with a
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| prospects, with a bright future in front
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| | projected profit of $100,000 is much
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| of them.This is generally a good strategy
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| | safer,
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| for real-estate investors to move to
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| | because a lot more can go wrong before a
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| later on, when
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| | loss is made.This doesn't mean than high
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| they have built up their portfolio. Long
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| | reward always means lower risk though.
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| term, well chosen property will make
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| | The
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| significantly more capital growth than
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| | conventional
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| poorly chosen property, and may be worth
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| | Risk vs Reward wisdom is still correct
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| buying even if it can only be bought at
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| | in general. So if you borrow more to buy
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| market value.And with commercial real
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| | a
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| estate investment, it may be worth
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| | property, your risk and reward have
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| getting a lower rental
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| | increased. If you buy in a small town to
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| yield, if this means you can have a high
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| | get a
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| quality tennant, who will pay the rent
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| | higher rental yield, your risk and
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| reliably. This is a strategy that famous
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| | reward have increased.This Risk vs Reward
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| New Zealand commercial real estate
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| | theory is only incorrect when directly
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| investor
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| | applied to the Margin Of
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| Bob Jones has applied, with great
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| | Safety concept. So if you buy something
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| success.3: ***** Margin Of Safety *****
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| | for $100,000 that all your analysis shows
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| One of the most important principals in
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| | is
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| value investing is "margin of
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| | worth $200,000, then your reward has
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| safety".Margin of Safety is the idea of
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| | gone up, while your risk has gone
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| making sure that you only invest if your
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| | down.Tony John is an experienced
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| calculations
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| | investor, who specialises in
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| show that there is a significant profit
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| | Commercial real estate
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| to be made. There is no way your analysis
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| | investment.
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| can
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| | Get his free email course now, and find
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| be 100% accurate, so the margin of
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| | out how easy it is for YOU to get your
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| safety gives you a buffer, to use when
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| | first
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| your
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| | real estate investment.
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| calculations are slightly off, or you
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|
