Did you know you can make money when you buy property, not when you sell?
Long-term price increases (inflation, appreciation) will typically boost a property’s eventual selling price. But before you can profit from the long run, you must survive the short run.
If you overpay, you may have to wait five years (or more) for the market to catch up. Even worse, during that wait, negative cash flows (the alligators) may eat you alive. Someone else picks up the same property at a much lower price. Even when investors do struggle through a swampland of alligators, they still miss the rewards they could have obtained if they had chosen a surer and safer route. Want to profit? Buy right!
Long-term successful investors make money when they buy, not just when they sell. You reduce risk and increase your chance for great returns when you buy properties at or (preferably) below their market values. But this tactic requires that you know what the term “market value” really means. (Note: When you buy at a bargain price, you often pay less than market value for a property.
However, I also encourage you to buy “undervalued” properties. In this sense, undervalued refers to all properties and/or locations that are loaded with strong potential for gains that may result from a variety of sources.
You’ll learn how to find and evaluate “undervalued” properties in later article
Culled from Investing in Real Estate by Robert Bruss