Just because an asset is priced low doesn’t mean it’s cheap – look at value not price

Many years ago, are used to get a newsletter mailshot from a company recommending penny shares.  Penny shares traded at 10, 20 or 30 pence per share, and the idea was that you could buy these ‘cheap’ shares in the hope that they will go up in value massively compared to buying a blue-chip stock.    The company was offering a paid newsletter subscription which would send you a monthly report on the penny shares to buy. In reality, the shares were not cheap, the value was the same as the price. They were high risk investments that could’ve gone either way. Furthermore, the share price depends on a many factors including the number of shares issued.  In the same way, buying a property because the price seems cheap may not always be the best policy. Just because you see a property for £50,000, which looks cheap compared properties in another area, does not follow that you’re getting a bargain. You might be just paying £50,000 for a property that is worth £50,000. There may be a reason it’s worth £50,000.  You need to do your homework to ascertain whether or not the property is really worth £50,000 and to find out the real value of the property.  Value versus price There is a difference between the price of something and the value. Sometimes the price of a property or share accurately reflects its true value, but not always.  As an investor, we are always aiming to buy a property or asset below market value, not below market price, so don’t be lazy and always do your research. The stock market has been rising for over ten years and is due for a correction. The UK economy goes through a recession every ten years or so and the last downturn started after the 2007-8 financial crash. Economies go through cycles of boom and bust and it is at those times of low confidence when the markets drop, often irrationally, that you will find real below market value bargains. Recessions are scary, but they do open up opportunities to acquire assets at greatly discounted prices. For instance, if and when the stock market has a correction, or crash, there will be a number of good company’s shares on sale at well below asset value. That will be the time to buy.  Now is the time to learn and do your research and have your funds or funding in place.  The same applies to property, even if you don’t have much cash. During property downturns when properties are at rock bottom prices, lenders typically restrict or even stop lending! I have witnessed this first-hand on a number of occasions when I knew there were bargains in London, but could not get the finance to buy them. If I had known then what I know now, I would have been able to acquire those properties without using traditional mortgage lenders or mortgages. Can you acquire property with ‘No Money Down’? Yes you can! Learn multiple no money down strategies by joining me at the “No Money Down Weekend” in London on 27 July. For more information, email me at [email protected]