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Thursday, December 31, 2009

I was reminded today to update my Blog after I had a cup of coffee with about the dumbest real estate investor I have ever met!!

After meeting with this knucklehead this morning, I will be updating my blog three times today. But the first thing I want to address is Axioms, Specifically from the media (what I cannot understand is why people believe what is published on mainstream is the truth?)They lie people, wake up!!!

Axioms Aren't Always True

Some things are repeated frequently enough they become accepted as common wisdom but closer inspection (not to mention recent history) most often portray a completely different understanding. Savvy REO investors would do well to take a look at these axioms that aren't always true.

Axiom #1 - Housing prices always rise.

Just a few years ago this headline seemed to be stealing the show as fevered buyers stood in line to snap up condo's and bidding wars drove home prices well above the initial asking price. Of course, those days are now long gone and with it the age old wisdom that housing prices always rise. But before tossing the entire idea out, take time to fully understand the basis for the original axiom; historically housing prices have risen and fallen but they do eventually reach higher and higher nominal values as a whole. In part, due to inflationary pressures. Since real estate is a tangible asset, it tends to retain value during inflationary periods of time. Because capitalistic economies count on a regular rate of inflation (roughly 3 percent), hard assets will tend to rise in value over long periods of time. That may be little consolation to those that purchased real estate at the height of the boom expecting it to rise even farther (these guys are the ones that have all of there portfolios in foreclosure). But should likewise provide tremendous consolation and encouragement to current REO investors buying distressed toxic assets my way.

Axiom #2 - Safety in Numbers.

When it comes to investing, this may be one of the most dangerous axioms still in existence. While there may be support for safety in numbers when it comes to purchasing a stock that has enough daily volume in order to sell at a later date, that is about the extent of it. (Example: Look at all of the new Condo projects being sold for pennies on the dollar now, They are not worth the 200k the where selling for and dnever will be) Remember, to make money in an investment requires others to give up their money or new wealth must be created (SFH bought and renovated at .50 cents on the dollar then sold to a family at .80 cents on the dollar, This is a good deal). Plain and simple, investors want to be the exception to the rule - not the rule. Contrarian investors tend to do well if they understand the fundamentals of value, wealth creation and the tax structure currently in operation.

Axiom #3 - Buy & Hold is the best strategy.

Although buy and hold is certainly a viable strategy, it isn't the only game in town. A fast flip can often jump start a sluggish portfolio or bring in enough funds to generate more meaningful gains. Even those that adopt a long-term investment strategy should not simply "buy and hold" but rather buy, hold and rebalance based upon new tax information, depreciation schedule and other individual circumstances. Just as one size doesn't fit all when it comes to investing, the same applies to each property purchased; one parcel may be perfect for a quick flip while another may generate long term profits with a buy and hold strategy.


Adam Boroughs

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