In order to make money on anything the mantra “buy low, sell high” always applies. So why don’t people try and live by this motto daily? I believe it is because most people don’t know what to look for or how to valuate something. I advocate that it is an important aspect in growing your wealth, and I hope to change or reinforce your buyer’s perspective.
Seeing value is something that everyone can do, but seeing something that is undervalued is something only a handful of people are good at? It is not impossible to learn, however, you just have to know where to look to find current value and know how to make an educated estimate on where future value is tracking. Value is determined by the amount of money someone is willing to spend to call an item his or hers. This value changes over time, fluctuating up and down.
Every time you view a large purchase as a buying opportunity…do a little research first before making the determination and ask yourself…if I buy this item now, what can I resell it for in the future? I think this is a huge step many people skip over. It should be a key component before deciding if you really should buy.
Take for example an ad I found on Craigslist where the seller was asking $275 for a two year old table and chairs originally purchased for $700. I show up to take a look and see that the dining set is worth every bit of the $275…in fact it is probably worth more like $400 or $500. This information was based mainly on my own Craigslist research for what similar dining sets were selling for compared with the prices of brand new models I had seen in local stores. My first observation was that the seller had the dining set out in their garage, which I found out through conversation was impeding them from using their garage to park their car. I also found out that it was considered a hazard to their little girls because the dining chairs were in fact stools that the children had troubling sitting in, and it was a gift from the In-Laws, which showed that the sellers were not really that invested in the table…probably the main reason the sellers listing price was only $275.
Now, I could buy the table outright for $275, but then again I am always looking for the best deal possible. I boldly asked them to lower the price to $200. Seems like a big step, but after some initial hesitation and a conversation with his wife to let her know I would be taking the table that day, they agreed to sell for $200. Because the seller held very little value in the table, this gave me the opportunity as the buyer to get a great deal and have outstanding resale opportunity in the future. When I sell the table, you can believe that my price tag will be closer to $500 because it is a very unique and large design. It is made of solid wood, and the entire dining set has little to no visible wear.
I tell you this story because it allows you to see how I go about assessing value and making my purchases. With any large purchase you make, ensure you do your research and find comparable items that help show the true value, ask yourself what you might be able to sell the item for in the future, make sure you at least try to negotiate the price if possible, and finally wait for the right time to buy. This is an easy way to increase your financial equity for the future and ensure you have more money coming in than going out, even if what is coming in is unrealized gain. Those invested dollars can be very profitable in the future.
In my next post I will show you how I use this same valuation model in my investment strategy.
BaldwInVest 