Access Wealth Strategies

(Author note: I wrote this post at the beginning of 2010 but it got lost in pending status until now.)

Every year, I see magazine articles or major websites that offer their best tips and strategies for the new year. Thus, I’ve decided to share my thoughts as well.

During this global “Great Recession” and related credit crunch, there are historic numbers of distressed assets on sale, and that includes more than just real estate.

Warren Buffett was talking about how great an investment distressed assets were back in 2008. In fact, he would buy them because he knew the long term value was higher than the current impared pricing. Listen to Buffett talk about what he would buy as much as he could in this video below.

The options available to Buffett are one thing, but what options are available to the rest of us?

• Perhaps you are a business owner who currently lease your store or shop space, then there are likely buildings you could purchase that could cost less than your current rent payment.
• If you want to invest in real estate, there are a variety of options. Certainly buying homes from wholesalers or the trustee sale auction is not too difficult.
• A more complicated deal would be to gather some investors to buy performing or non-performing real estate loans at a discount. The numbers I’ve seen are that non-performing loans are selling for 30% of face amount and performing ones are selling for 60%. If the loan ends up performing then you get a good return. If you have to foreclose, you may end up with a great return.
• Paper assets are also on sale. Earlier in 2009, stocks certainly crashed down to levels not seen for a decade. They could fall again.
• How about buying a business from an over-extended owner who needs to raise cash? Make sure it’s a business you know very well and want to own.

A very experienced businessman once told us he’d seen 3 different real estate cycles in the Phoenix area over 30 years.  During the prior cycle he saw people who drove in to town in a pickup truck and a decade later, flew out in their personal Lear jet. They had made millions from buying and selling real estate assets during the market downturn and subsequent rebound.

That’s the cycle we are in now.  What do you think about it? How are you going to capitalize on it?

When is the right time to buy an asset for investment purposes? This could the most important question an investor asks himself or herself.

There is not one right answer for everyone that applies at all times. Instead it takes judgment and applying core principles to answer this question.

The most successful passive investor of all time, Warren Buffett, provides a few guiding principles in answering the question, “When is the right time to buy an asset?”

Let’s take a look at a few of Buffett’s famous quotes.

“A public opinion poll is no substitute for thought.”

My transation: Just becuase something is popular doesn’t mean it is the best buy in the marketplace.

“The investor of today does not profit from yesterday’s growth.”

My Translation: If you buy an asset today you DON’T get the past profits, only the future profit from the investment.

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

My Translation: The best time to buy (or sell) is when everyone else is doing the opposite.

So, we see that from Warren Buffett’s perspective, the time to buy an asset might be when people think he’s crazy to do it.

Think back to fall 2008 when Warren Buffett made a multi-billion investment in both General Electric and Goldman Sachs. At the time the financial world almost failed, yet just over a year later he has a multi-billion dollar profit plus 10% preferred dividends while he waits. Not too shabby.

What do you think? Have you seen Buffett’s principles at work in your investing life? Or do you have a different way of timing your asset acquisition and how much success have you had? Please comment below and let us know.