3 Keys to Investing in an Up Market
Property values are going up; investors have cash to spare and both the stock and real estate markets are hotter than kittens on the internet. Your realtor buddy, neighbor or sister is telling you to hurry and buy something as it’s only going to get better. Voices everywhere are saying “If you don’t move now, you’re going to miss the train bound for Gazillionaire land.” Hurry! Hurry! Hurry!
Okay, stop. You’re reading this because you’d like some advice on how to make some good long term money through investing in our current market. The reality is that the following advice applies to all markets, both up or down and is critical to long term successful investing.
Here’s your advice in 3 steps:
Step 1: Patience. If you invest $50k for 10 years at 3%, you’ll net close to the same amount of interest by being patient and investing $50k for 5 years at 6% after waiting for 5 years because you couldn’t find anything. If you’ve been looking and the better returns aren’t anywhere to be found, just be patient. That’s not saying there aren’t diamonds in the rough, but you may have to work harder to find them and likely they’ll be riskier. Stepping back, breathing and just allowing yourself to be patient, is going to help you avoid making a lot of mistakes. Time isn’t the only consideration when growing the value of your money, the rate of return is what will determine how fast your wealth grows.
Step 2: Be a Robot. When it comes to investing, the key is to stay non-emotional. Robots compute everything based on the input data they receive. At their most basic programming level, they either get a yes or a no response to the input and ultimately that determines their actions. In investing, we want to do the same thing- keep strictly to the numbers, and if after inputting the assumptions, if the answer is no, then walk away. If it’s yes, simply proceed to the next step. Don’t start manipulating your realistic assumptions on your input data so that you can get the analysis to output the returns you want. In the investing world we have a name for people that people that do that – “Stupid Idiots”. Okay, so I’m kidding about the name, but that is a surefire way to lose money fast. Do quality analysis every time and like a robot let the numbers dictate your investment actions. If you keep getting “no” responses, refer back to step #1.
Step 3: Quality Analysis. Okay, so behaving like a robot is pointless if you don’t know how to do a quality analysis. You’re Roomba robot vacuum does a good job vacuuming, but if you told it to do the dishes, it’s about as effective as telling a toddler to stay in bed after you let them eat 4 pieces of cake….ain’t gonna happen. Learning to do quality analysis is not just running some quick numbers. Knowing the what, why and where to get quality data to analyze is extremely important. After you have this, it’s fairly easy to find lots of free or cheap investment calculators, but the key isn’t in just running the numbers, it’s in understanding what they’re saying. This is where the robot “yes” or “no” command is to be found. Successful investing all starts with quality analysis.
Interested in learning more about how to successfully invest in real estate for the long term? Axiom Properties & Development Inc. offers investment consulting, management and brokerage services and coming in 2018, will offer online courses on how to invest in real estate. If you have any questions- we’d love to chat with you. Just go to http://axiom-properties.com and click on “Let’s Talk” in the bottom corner of the screen. We’re here to help every investor be successful.
- Mark Bitton