Are Real Estate Markets
Yes, real estate markets are inefficient. And that is the main reason
why an average person can make extraordinary profits using real estate
investment as a vehicle.
theory of "efficient markets" states that the price of an asset
reflects all known information regarding that asset. In other words,
the price of the asset reflects its true value at any given moment in
time. Hence, there is no such thing as an undervalued asset.
you were to look closely at many types of real estate markets, clearly
this is not the case. And in markets that are inefficient, participants
with superior and/or more market information to identify and capitalize
on undervalued assets.
Is it easy? Absolutely not. It requires a
superior knowledge of your chosen market place, and persistence to find
deals that can be purchased below market value.
Here is an example.
have focused a lot of my investing on buying apartment properties in
smaller towns. Over the years I have gathered a tremendous amount of
information and experience with respect to not only investing in
apartment properties, but also investing in smaller towns. Much of the
information that I possess, both public and private information, is not
available to the average investor who does not specialize in these
types of real estate markets.
A few years back I was able to
purchase a large commercial complex consisting of both apartments and
retail/office space, 22% below market value. The sellers were marketing
the property themselves, needed to sell quickly, and did not have the
information they needed to determine the true market value of their
asset. Remember, selling real estate, especially large commercial
properties is not like selling stock. You can't just call your broker
and say sell it right now!
Now had the sellers had the
information I did, and had they marketed it properly, it is unlikely I
would have negotiated a discount of $350,000 on the purchase price.
The reason I was able to negotiate a $350,000 profit before I even
closed on the deal was due to an inefficient market.
estate markets are not fluid, continuous or efficient. By becoming an
expert in your particular target market will increase your chances of
earning extraordinary profits.
you like to learn more about investing in apartment properties and how
you can start generating a monthly passive income? If so, I recommend
that you start with an inexpensive course (under $100) like this one.
Remember, the more you educate yourself now, the greater your ability
to "outperform" your competitors and take advantage of the market
inefficiencies I have been talking about.
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