| Topic : Real Estate value chain |
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Real Estate financing solutions |
Regulatory Compliance Management in life sciences industry
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Source : http://www.articles2k.com
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2 comments
407 views
last activity : 07 06 2010 20:18:04 +0000
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Is Real Estate Investing, a type of speculation?
Well some say yes and some disagree with it. Well, both the view points are right. Under some circumstances it is speculating and vice versa. Lets see when the two scenarios happen:
- How real estate investing is different from speculation:
- How real estate investing and speculation are same under different situations
Well before I explain why Real Estate Investing is not a speculation, let me tell you what Speculation is;
How I define Speculation;
- Speculating involves taking on more than usual risk.
- Speculating involve banking on values that aren't there today, and aren't projected to be there based on NORMAL conservative appreciation rates.
- Speculating is banking on external or environmental factors to make you money. External and Environmental Factors (that pertain to property) are factors that are not part of the property itself such as neighborhood, infrastructure, city, the paper mill down the road, rental demand, etc.
In case of real estate following principles are applied:
- Buying property that you are "safe" in, meaning you could rehab it and sell it in the short term and make money.
- Buying property that will make you money based on what you bought it for, current environmental factors, and conservative appreciation rates.
- Buying property such that hope is not part of the strategy!
So if your real estate investing is following these principles, then it is not speculation and any one factor missing, I would call it a speculative activity.
While all investing...in anything... has some element of risk to it, I want to highlight a key difference between speculation and investment. When you speculate, risk is higher and by the nature of the word speculation, more risk than usual is implied.
So, in that context speculation doesn't fit what I advocate at all. I'll explain further, but first let me illustrate the difference between investment and speculation in real estate rehabber terms from something that happened to me just this week.
So its up to you what you take it as a speculation or not. The points are both in favour as well as its you who has to decide and take your stand on this point.
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