Real Estate Investment – Don't Discount the Simple Solutions

When real estate was appreciating at a rapid rate everywhere, new investment “experts” were popping up left and right. And, this being America, there seems to be a need to come up with a newer and better mousetrap to prove value. The problem comes when the fundamentals of investment are ignored or replaced by so-called sophisticated strategies that multiply risk to achieve dubious rewards.

The funny thing is, now that appreciation has stopped or dramatically slowed in many markets, new “experts” keep popping up. And, the “better” and “newer” methods some are pushing are just new packaging on old ideas that didn't work in the first place. Sometimes getting back to the simple is the solution. Yes, creativity lends a hand to solve specific challenges in any deal, but the fundamentals are almost always the original play.

An investment story that illustrates complexity and risk is a very true experience of a stock market options trader. He studied options trading and read books until he knew more than most stock brokers. There wasn't a sophisticated strategy that he hadn't used multiple times....though results weren't always as planned. One day, one of his market tracking software packages produced an alert on a well known bank stock. There was a heavy spike in the purchase of options, possibly indicating something in the wind for this stock.

Our options guru plowed through his toolbox of exotic strategies like vertical, horizontal, diagonal and butterfly spreads. He settled on a strategy that was complex, but assured that he would make money even if the stock stood still or rose significantly in price. He bragged about his trade to his wife, who bought 100 shares of the stock. As it turned out, the bank was the target of a takeover, and the announcement came three days later. The stock almost doubled in price. And guess what? That took him outside the profitability curve of his exotic spread. He lost money, while his wife made a killing....true story. Sometimes it's all about simplicity and fundamentals....not hype or exotic plays.

Our goal is to bring solid real estate investment information to our readers and clients. It will not always sound exciting or exotic, but it involves tried and true strategies that will provide solid returns with lower risk. The noise volume of words rarely indicates value.