Investing 101

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When the Real Estate market was booming in early 2000, speculation and excitement drove sales up regardless of the irrational inflated values assessed to properties in the market.
The masses persuaded themselves to place their savings, retirement, into a sure thing: Real Estate. The Real Estate bubble was bound to burst and it did. That's why we need to go back and relook at Investing 101.

Our take...
So let's take a look at our interpretation of Investing 101 when it comes to Real Estate. Here's a word of advice for aspiring investors and a friendly reminder for seasoned investors: When the Real Estate market is booming it is time to sit back and watch. Why? Because the price of the property you purchase would supersede the incoming potential of that investment.

Centuries ago
Baron de Rothschild advised, "Buy when the blood is running in the streets." Yet, when it comes to the recent Real Estate boom, we let our emotions get the best of us and decided that we just had to have a piece of the pie." We could not afford to miss the opportunity to make a quick buck. Let's review what one of the best investors of all times said about opportunity as it relates to a Real Estate boom:

"Buy when others remain fearful, sell when others become greedy." - Warren Buffet.

And here's one of our personal favorite quotes from the Oracle of Omaha, "Nothing sedates rationality like large doses of effortless money." Here's the naked truth, as raw as it can be. If you are a distressed homeowner or investor, your ego is probably screaming right now and begging you to close the browser and take the dog for a walk.

Entrepeneurs do not live by the greater fool theory: If I am a fool to pay this much, I will find a greater fool to pay me more.

Here's some basics in Investing 101 and finance in general quoted by Warren Buffett. They apply to all investments including Real Estate:

1. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
2. You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right—and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else.
3. When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.
4. Risk comes from not knowing what you're doing.
5. If you don't know jewelry, know the jeweler.
6. If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.
7. Public-opinion poll is no substitute for thought.
8. The most important quality for an investor is temperament, not intellect... You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.
9. "I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. "I'm paying $32 billion today for the Coca Cola Company because..." If you can't answer that question, you shouldn't buy it. If you can answer that question, and you do it a few times, you'll make a lot of money."
10. Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.

Now that you know what NOT to do, what should you DO to become a successful investor in Real Estate? There it is: Investing 101.