Profit: Start Low

Profit: Start Low

Learn from Walmart. One reason of their boom success is buying goods at the lowest possible cost. Profit is always made when purchased, not when you sell. It is somehow trivial but it is the key. Buying is the key to any industry. Selling is only the profit realization.

As to quote Warren Buffet, “Buy at below value (because) rule number 1 is never lose money; rule number 2 is do not forget rule #1.” Don’t buy until you have a margin of safety. Even if the market recessed or you are 50% wrong or off in market valuation of what you buy, you can still earn money.

Buy cheap or cheaper especially today, when U.S. economy is in near recession. Recessions cut purchasing power of buyers and pricing up is not just too possible in the real property industry. Profits, therefore, is bleak, but buying cheap (and cheaper) will widen the margin of safety. $300 property will provide you a $4700 profit margin, considering my usual selling price of $5000 on normal market. That selling price will probably adjust down during recession, say $4000, to accommodate buyer’s lower purchasing power. Though profit is trimmed, buying cheap at $300 will still give you substantial earning.

Buy rural lands and lands without houses because these properties often are cheap and even cheaper during recessions. Buy rural lands from property tax delinquents because they are the cheapest. Owners of such properties just gave up their ownership and redemption rights to prevent the burden of paying more taxes, penalties and other fees. Most importantly, buy properties with no mortgages because banks pay the properties and these mortgaged properties just give you additional investment costs.

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