Recognizing market shifts
Imagine if there was a market shift in the technology sector that caused all technology stocks to temporarily drop. However, looking at the role technology plays in our modern lives, one could be confident that the prices would soon rebound. The situation just described is an example of undervaluation; or discounted property. It is analogous to the current state of the real estate property market in the United State.
Using Leverage in Property Investment
One of the most underestimated principles in property investment is that of leverage. A brilliantly simple way of understanding leverage was put forth by Eugene F. Brigham in Fundamentals of Financial Management (1995): "In finance, leverage is a general term for any technique to multiply gains and losses." This applies to Property Investment via the fixed asset nature of property.
cites one example of how this can be accomplished: "If one were to lock in the gains of real estate at year 8 (around $125K), the person could use the gains to buy three more $200K homes, getting more and more leverage." This is a very simple, yet effective approach to gaining leverage using real estate as a fixed asset.
Transparency in Real Estate vs. the Stock Market
One common observation in the last few years has been one that takes issue with transparency. Until recently, the commonly held knowledge was that stock investments were more transparent than other investment opportunities. There were several reasons for this belief: finance professionals such as traders were closely following the company practices, independent audits by accounting firms verified corporate claims, and the whole market is federally regulated. Once these protections were skirted by WorldCom, Tyco and Enron, transparency began to be examined more closely. Investment properties began to be seen as a stronger investment within the context of transparency.
put it this way: "Real estate, on the other hand, is tangible. You can check the basement, consult a termite inspector and make sure that nobody is building a pig farm next door....You can verify the property taxes, the cost of utilities and everything else about the property."
Turnkey Property Investment
Lastly is the question of ease of investment. There are companies everywhere willing and capable of helping investors choose, purchase, and manage their stock investments. A widely held misconception is that there aren't investment property companies offering similar services. Memphis Invest provides a variety of such services. Memphis Invest assists investors in identifying and acquiring undervalued properties, leveraging existing properties and holdings, and will ensure all the knowable factors are available to the investor in a clear, concise way. Image credit: