Alternatives to Making a Fortune From the Housing Market

Here's a simple enough question. Suppose I bought a house, two years ago. I paid one hundred thousand for it. Now, two years later, the house has been valued at three hundred thousand. Great. Good news. So, how much money have I made? 'Ah', most people would say, 'that really is an easy one. You've made two hundred thousand'. Wrong. That's not correct. The right answer is that I've made NOTHING. All that's happened is that I acquired an asset and it has gone up in value. I've made no money. That's the catch, you see. I may have seen an increase in value but I've got no extra cash and won't have, until I sell the asset. That's a problem, if I happen to be living in it, but that's another issue which most home owners don't seem to appreciate. But the first dilemma is the big one: house buyers all over Britain have been panicking recently, at the news that the housing market is in decline. 'I've made so much money in the last few years', they say to themselves, 'and now I'm about to lose it'. Nonsense. If you're still in the same house, then you never actually made any MONEY when prices went up and you won't lose any, now that they're going down. That's simple economics. Unfortunately, people who dabble in the housing market and assume that they know what they're doing, actually know nothing about economics. That's why they're doomed to disappointment.

There's a saying that 'In the country of the blind, the one-eyed man is King'. In terms of business and economics, it would mean that anyone who has studied economics at High School would know about, oh, I don't know, shall we say a HUNDRED times more than the average householder. They would know that stuff above about the difference between value and cash in hand, for instance, and be quietly laughing at all the home owners who greedily boasted about their 'profits' over the last few years. Let's get this straight, you only make a profit on a trade. You buy your house cheaply and sell it at a higher price? Well done, you've made a profit. You buy your house and it doubles in value? You've made no 'profit' at all. If you don't believe me, check your bank account. It won't have any extra money in it. You won't have more cash to see you through until payday. Any Estate Agent or Realtor will encourage you, and say proudly that you've made 'paper profits'. Well, they aren't worth a dime, quite frankly. They aren't worth the paper they're printed on. The only profit that's anywhere near real is the increase in your bank balance, and that doesn't come about until you've been both a buyer and a seller. That's a tip: you want to know how much money you've made from the housing market? Ask yourself: how many houses have I SOLD recently? You make money when you sell a house, not when you buy one, but sadly, that's a lesson less learned, just as the world of business is the road less travelled. The business person will look at many things in making up their minds where to invest their assets. They will look at the market from all angles. For instance, they might see that the price of housing is generally going up. Then comes the most important question: 'How can I make money in this situation?' The answer, or one of them, would be to buy and sell houses. The business people might do that, and yes, some of the 'amateurs' might do that as well. The worrying thing is the number of ordinary people who dive into the housing market, bouyed up by what they read in the papers or what they've seen on television. A recent programme showed investors at an auction. The interviewer asked one of them, a new convert to the housing game, and he said that he'd seen a show on television and thought he could do what they were doing. ONE show? Would you base a business career on ONE telly show? The frightening thing is that the person seemed bouyant with confidence, full of assurances that he would soon be making profits. Unfortunately, he had taken a second mortgage on the house he lived in, in order to finance his new venture. That's not good. If something goes wrong, he'll lose his assets, all of them, including the place where he now lives.

There's another business lesson that might be worth learning. That is, 'Stay ahead of the game'. If house prices are going down, then it's not a good time to buy. Wait until they bottom out, invest them and cheer as your asset value goes up. Meanwhile, look around for something else to put your hard-earned cash into. What is coming? What is doing well? Where are the profits of the future going to be made? One tip might be to look at the world of alternative energy. There's genuine fear that oil is going to run out. What could replace it? However, remember that tip up there. First, look at what is happening in the market. What's going up, what's coming down? Who's dabbling and who's getting involved? Then, ask the vital question, 'How can I make money?' It might not be as obvious as you think. The big boys are getting into wind farms right now, so maybe that's something to steer clear of. What other technologies are being developed? Not sure? Go and ask at your local University. Try and find out what's on the lab bench at the moment, that in a few years' time could be the new norm. Hmm, not interested? Well, yes, I know, it all sounds like a lot of work, and maybe that's why real 'business' has never caught on to these new opportunities. The housing market has always had an appeal because it seems so easy. Buy a house, sell a house. Hey, 'We can all do that', they say. Can't we? Not successfully. The collapse of house prices and the winding up of banks and financial institutions proves one thing: there's a lot of uncertainty out there. And in uncertain times, one thing is certain: the amateur gets screwed while the professional has cut and run, saving their energies for future business and other opportunities. If you can't be bothered to read a book and find out more about the business world, maybe you shouldn't dabble your toe in the water. There's sharks out there.