Tuesday, 3 June 2014

Investing with Productive Value in Mind

Why is it that I like investing in properties? It’s because of something that I call “Productive Value”.

A property that I have invested in can be put into productive use to help me generate income and cash flow while I wait for it to appreciate in value over time. For example, I am able to rent out the property to tenants or even use it as a business premises.

Alternative forms of property investments such as REITs can also provide me productive value through dividends while giving time to the REIT manager to grow their stock value through asset acquisitions or enhancements.

Investment in precious metals (eg gold and platinum) can certainly yield very good capital appreciation when it’s on the uptrend. However, I won’t be able to put the gold I own into any productive use while waiting for the prices to increase!

Therefore, one should always consider productive value when it comes to property investments. I have said before that I do not encourage investment in uncompleted property, as I cannot earn any income from it while waiting for its completion. Moreover, developers tend to price new launches based on future values. It has no productive value to me for a few years and I am would end up paying a premium for it!

Till the next post,
Wien

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