Intrinsic Value in Investment Properties

There exists in all investments an intrinsic value of some kind. This value is a dollar amount, and it is what the investment is “really” worth. The investment may not be worth this amount at any given time because of market conditions, but it does still have this intrinsic value. The intrinsic value is based off of facts, not opinions. It is based off of quantitative information, not qualitative. When we examine a piece of stock, we calculate the intrinsic value based on the amount of assets a company owns minus the debt against it. What is leftover is divided by the number of shares, and each share then has its intrinsic value. Another approach for determining the value of stock is the excess of expected earnings and dividends for a period of years above a normal interest return. To determine the intrinsic value of a piece of property, we can multiply its monthly income by one hundred. This will give us a number to work with.

Investment Properties Compared with Stock

Buying investment property is really no different than buying stock. The market for property moves much slower than the stock market does, and this is a very good thing, for it gives us plenty of time to make informed, well calculated decisions.

If we are buying in hopes of the value going up, or relying on appreciation for profit, then we are no different than a gambler. Gamblers exist in every industry. Then, there are those who consider themselves investors because of their intense research on the qualitative factors surrounding an investment, but these people are really just speculators. Both gamblers and speculators play the guessing game, and they both try to predict the future. Most of those who “invest” really speculate, except that they think they are investing. They think that they are investing because they are doing a lot of research. However, they never look at the correct, factual information. What many of them do is simply read the opinions of “experts.”