A low-price asset is not always 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 stockmarket 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 charles@charleskelly.net