Recognize the Difference between Short Term and Long Term Investment Opportunities


An investor who concentrates on short term investments is always on the lookout for a quick turnaround deal. A long term investor chooses to focus on situations where the outcome looks bright far into the future. Whether you want to deal in short term or long term investments, it is important to recognize what makes these opportunities different.

Potential

The short term investment has the potential to make a large amount of money in months or even in weeks. Recognize these opportunities by their very low asking prices or by seeking distressed mortgages. Long term prospects often come in a more subtle way, with prices that are at least somewhat under market value and the potential to rise over the next year or years.

Risk

Short term investment is riskier. You place your bet on being able to resell the property in a very short time, but there may be circumstances that make that difficult. The property may need more improvements than you anticipated. It may sit on the market longer than expected and require extra maintenance costs during that time. Such situations make your investment less profitable.

With long term investment, there is less risk if you have done your homework. You have a good idea of where the market is headed in the future, and you have time to wait for it to arrive at that point. You also know that there will be maintenance costs, so you plan for those in the first place.

Reaction Time

When you see an opportunity to buy real estate and turn it around for a fast profit, it is essential to act quickly. Those properties that have the potential to provide worthwhile gains go fast once investors get the word that they exist. Your only hope may be to get there before anyone else does. Otherwise, you might pay so much for the property that you lose a good deal of the profit. With a long term investment, you would not want to wait around for the opportunity to go away, but you will probably have more leeway in deciding on and setting up the deal.

Locations

Short term investments can happen anywhere there is a property that is being sold for less than it is worth. You find the opportunity and turn it into profit quickly no matter where it is located. Of course, you have that freedom with long term real estate investments too, but these are more likely in certain areas.

Places where a market is seeing a temporary downturn are good long term bets if they have the characteristics that will entice people to come back to them. For instance, the Florida market has seen a dip and many foreclosures. It is not likely to be a long term flop, because people love to live in warm weather and be near so many recreational activities. Just by recognizing that an area such as this offers many long term real estate investments, you can build an inventory of properties to hold onto for future sales. That is the difference between short term and long term investments – with one you pick up properties and sell them off immediately; with the other, you hold on until the market turns around.

Comments are closed.