There are some principles you’ll want to keep in mind, however, which we will go over in this investment guide. Many so-called investors buy property with the intention of selling it at some future date after the property appreciates. This is merely speculation; it is not investment. Never, ever try to predict the future. It’s silly to; none of us are fortune tellers, and none of us have crystal balls.

Make sure that you are looking at investment property that guarantees you both safety and profit beyond any reasonable doubt.

The first thing to do when buying investment property is to figure out the property’s intrinsic value. This is what the property should be worth, not what its actual price is. As investors, we only care about the price in one instance; for all other purposes, we are concerned with the property’s value. We watch the price casually, and when it dips below the intrinsic value, we watch it like a hawk. We will buy only when it dips below eighty percent of the intrinsic value. This will give us a margin of safety of twenty percent; the price can decline this much before we lose any value.

You must find a way to assure yourself of a profit, otherwise the investment is silly. You’ll want to find properties which need repair but are structurally sound. Estimate the repair expenses, and then calculate the purchase price per square foot. Subtract this from the new construction price per square foot of similar homes in the area, and this difference needs to be at least double the estimated repair costs. When you repair the home, it will increase your equity in the home by double the amount.

Now, you have a way guaranteed to make you profit; you have a sure way to increase your equity. You can take this equity and trade it in an exchange as a down payment for a larger property with more units. Both residential and commercial investment properties need to work this way; sometimes, you can increase the equity by making the operations better, rather than physically repairing the home.

Property investment is really comprised of property investment and property speculation. The speculative type is often confused for the investment type. In order for an operation to be classified as an investment, safety and profit must both be assured beyond a reasonable doubt. Then, it can be precisely called an investment. Otherwise, the operation is a speculative one, not an investment.

Tags : FSBO, Property Guide, Retail Properties