Keep it simple: buy cheap
12th November 2007
Property investors would do well to heed the advice of a learned US fund manager who summarised his approach to the share market as, "We try to buy stocks cheap", according to Michael Carman from Wealth Enhance.
Walter Schloss, a fund manager who's now in his 90s and retired, told an interviewer some years back of his simple approach to investing and legendary investment fund manager Warren Buffett cited the comments approvingly in a recent memo to shareholders.
The 'buy cheap' line was deceiving in its simplicity and applied to property as much as shares, Carman said. "For property investors it's easy to get caught up second-guessing when the property market will turn or reading the tea leaves of Reserve Bank statements to try and predict interest rate movements," Carman wrote in a recent Wealth Enhancement Bulletin.
"Schloss' advice, although aimed at shares rather than property, is nonetheless a salutary reminder of an investing and wealth creation fundamental: you make your money when you buy, so buy smart to build wealth.
"That said, the present time offers some terrific opportunities for buying cheap property. When prices overall are plateauing or growing slowly, investor and media interest is directed elsewhere, heightening the ability to locate bargains.
"In a similar vein there is a silver lining to the cloud of the (latest) interest rate rise... more bargains will surface as bank foreclosures rise, and the time for finding those bargains will lengthen.
“Add to that the inherent variability in prices across any given property market and your search for cheap properties is a veritable treasure hunt!"
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