Worlds richest man on invetment sucess

[Investy]

I've made a study of the worlds richest man, Warren Buffet. This guy has been near the top of the rich list for decades and is top of the list despite giving away at least 5% pa to charity.

The following principle epitomises his success and we as property investors I think would do well to take note:

"I get scared when everyone else in interested, but I get interested when everyone else is scared"

This has been my own core investment principle. In a nut shell it means the very worst way to invest is on the back of historic price action and crowd following. Thats why I avoided specifically the US, UK, SPain and Bulgaria in the last couple of years.


He is cautious with his research and tries to invest on a 'no loss' policy. He also buy only where he percieves good value - he would never buy a Spannish villa just becasue of ssome vague notion that ermmmmmmm property goes up long term.
He also seeks high yields, which for us means decent year round rental yield - not a Bulgarian beach property with a 3 month tourism season.

So folks, if you keep mindful of these core principles you should fare very well.

 

[DC]

I thought Bill Gates was the richest and Warren was second, and the south american telecomms guy for a moment was richest for a short time. Anyway Buffett is a legend. Berkshire Hathaway.
Bill Gates is the worlds biggest donor.
Buffett bought in Almeria about 30 years ago. Land.

It is good to watch the wealthy and what they do. Buffett is all about VALUE investing.
And understanding what value is. Gifted the man is a financial Genuis. He knows how to make money and keep it. ie. Not giving it to the tax man.

He is a genuis. A rich one at that.

 

[New Home in Turkey]

I wonder if he does real estate investment?

 

[Investy]

He made his name in stocks and shares not property.

The same principles apply though, and for him yield is king.
A lot of agents describe buying a property as 'investing' but this is far from accurate.

Investing is about generating a total net return over and above your total costs to include the cost of introuding capital from your own savings or by borrowing in the UK and abroad.

I'm amazed how many people tell me they "made £100,000 cause they bought for £100,000 and sold for £200,000"!!!

 

[DC]

Please explain further this statement, if you would

Investing is about generating a total net return over and above your total costs to include the cost of introuding capital from your own savings or by borrowing in the UK and abroad.

I'm amazed how many people tell me they "made £100,000 cause they bought for £100,000 and sold for £200,000"!!!


In truth the bottom statement is how most people would react. Please explain the first statement more fully, and if you would be kind enough to give an example.
Please explain in simple terms

 

[Lysos]

I think what Investy is saying is that people oversimplify things sometimes;

let's say you bought a house for £100k cash, ancillary costs , your time & costs researching and finding the property (often overlooked),legal fees. Five years later you sell for £200k - less any maintenance costs during the period, the interest your money could have been earning, tax, legal fees, estate agency fees etc. Still a nice profit, but not quite as impressive as it first seems.

 

[The Soup Dragon]

I'm confident that's what Investy was getting at. Its human nature to show that you have done well. Simplifying things by only comparing prices bought and sold for helps create the perception they have done better than they have. How many gamblers do you know that tell you what they have lost?

 

[Investy]

Please explain further this statement, if you would

Investing is about generating a total net return over and above your total costs to include the cost of introuding capital from your own savings or by borrowing in the UK and abroad.

All the time (through my work) people tell me how they made 'x' amount from property investment but invariably they have not accounted for all costs which brings the net return down.

Some of the costs that are typically over looked include;

1) Lost interest on money that was hitherto attracting c5% interest in a savings account. £50000 removed from a savings account for 3 years would cause a loss in interest of about £8000 compounded.

2) Interest due on a mortgage. Typically people release equity from thier UK dwelling and then forget this cost and the fees involved.
An investor should deduct such costs from thier total return, but all I ever hear is "I paid £100000 and solf for £170000 so I made an easy £70000"


Of course there are many many other costs including purchase and EXIT costs, the latter often ignored by the buyouant 'investor'.

Then there's good old taxes in the host nation and the UK. Almost no one ever mentions this cost unless they are a true investor.


TAKE LAST NIGHT;
A Place In The Sun (hotspots) featured a couple that spent the last 5 years doing up a mill into appartments to let.

The toal profit quoted by the presenter was £170000 capital gain over and above improvement costs, however this failed to take account of these items:

1) Income lost as a result of the couple not working as they did the renovations themselves. I imagine they could have earned £50000 pa between them had they remained employed so thats a £250000 cost to start.

2) Tax was'nt factored in.

3) Interest lost on money withdrawn form or that could have been invested in a savings account. I would estimate that cost at at least £20000.


In other words there really wasnt a worthwhile profit to speak of, indeed I would say if they sold now they would merely earn a proportion of what they would have earned hasd they remained employed and never done the venture.

 

[New Home in Turkey]

Each and every investor should take into consideration one very crucial fact before investing, and it is called "opportunity cost".

As described in Wikipedia:
"Opportunity cost is the cost incurred (sacrifice) by choosing one option over the next best alternative (which may be equally desired). Thus, opportunity cost is the cost of pursuing one choice instead of another. Every action has an opportunity cost. For example, someone who invests $10,000 in a stock denies oneself the interest that one can easily earn by leaving the $10,000 dollars in a bank account instead. Opportunity cost is not restricted to monetary or financial costs: lost time, pleasure or any other benefit that provides utility should also be considered.

Opportunity cost is a key concept in economics because it implies the choice between desirable, yet mutually-exclusive results."

 

[The Soup Dragon]

Investy. The profit mentioned on A Place In The Sun made me smile too. I suspect that if they had held the property five years, doing nothing to it, they would have been looking at a similar paper profit.

Didn't see much of the show, but I suspect it was as much about lifestyle / living the dream as being an investment.