What Investments Are Working In 2006? ~ By Chris Anderson, Ph.D.
January 18, 2006
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As one of my mentors, Dr. Van Tharp, told me a few years back, "an investor or trader can only invest or trade their beliefs in the market" He then elaborated that this little tidbit was what separated those that make over $1 Million/Year in the market and those that constantly struggle.
Being the overly analytical type, my first thought was
This guy is nuts... what does one "beliefs" have to do with anything.
Of course then my second thought was
This guy is one of the top trading and investing coaches in the world, maybe I should listen.
What Van went on to explain was that by understanding your "beliefs" about a market, you are always in a position to act quickly. Let me give you a example to illustrate. Suppose that your belief is that over the next 5 years, Florida is just going to continue to boom in population, housing demand, land use limitations, etc. With that belief, then you are going to take the steps to get information on lots of opportunities coming from Florida... That is if you are serious about investing.
As I look into 2006, or most any other year for that matter, I see a tremendous amount of opportunity that is possible for real estate investors. With that said, I also see substantial risks. But please don't misunderstand, most serious investors always see a large amount of opportunity and risk and 2006 is no different.
At this point, EVERYBODY understands that
1) We have had a large real estate run up;
2) Baby boomers are greatly impacting real estate; and
3) Real estate sales have slowed down in some areas.
Given that these ideas are common knowledge, now the question becomes what are your "beliefs" as you go into this year. In this article, I will share my "beliefs" even though they may be very different from yours.
I have two very fundamental "beliefs" about real estate investing that held true in 1995, 2000, 2005, and will hopefully hold true for as long as I invest. These beliefs are:
- Buy when you "believe" the future demand far outstrips future supply;
- Invest when you "believe" the reward far outstrips the risks.
In many, many cases, I see investors focus on only the reward side but they never ask how much risk.
With those two fundamental "beliefs" in place, now let's look at the specific "beliefs" I have for 2006 that guide all my investments:
- Long term baby boomer trend well underway and is impacting areas like Florida, Georgia, Carolinas, Nevada, Arizona, etc.
- Areas attractive to boomers WILL DO VERY WELL over the 5-10 year horizon (but there could be a short term dip somewhere);
- Florida's population will nearly DOUBLE over the next 25 years;
- In areas impacted by boomers, AFFORDABLE housing is, and will continue to be a huge issue because demand will escalate prices.
Now we can take these "beliefs" and get even more specific as we look for strategies going into 2006. For the affluent, it is our "belief" that the demand for "unique" properties will continue to rise over the 5-10 year horizon. This includes
- Communities with great amenities;
- Communities offering good security, lifestyle, and medical.
For the affluent, we see opportunities ranging from land purchases, to single family homes, to occasionally condos of good value. Frequently, purchasers are from outside the area.
For the working class, affordability is really the key. In the baby boomer areas, the demand for workers will continue to rise as more people with wealth continue to move into the region. Unfortunately, this will continue to put pressure on housing prices in the lower end of the price spectrum. For investors, this is great news. It means that in the right areas, you can buy into starter single family homes, townhomes, inexpensive condos, etc and have very little long term risk. In addition, you always have the ability to rent these kinds of properties.
To summarize, in areas that match my "beliefs" outlined above, I see tremendous opportunities over the long haul and will continue to invest as opportunities arise. My suggestion is to determine your "beliefs" for 2006 so that when opportunity arises, you will be ready to strike rapidly.
About The Author
Dr. Chris Anderson is the founder of one of the largest preconstruction groups on the internet today and is referenced in many venues including the New York Times and USA Today. Get access to wholesale property investments today.
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