Investing –  expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.

Whatever you are using as an investment vehicle (stocks, bonds, mutual funds , etf’s, property or a business to name a number of the most common vehicles) the process and the principles are the same.

House Flipping

While watching a TV show about house flipping the other day it occured to me how walking through the process (step by step ) would be a great way to illustrate the common generic investment practices.

These practices can be leveraged to make positive investments consistently.  That is regardless of the investment vehicle.  Whatever you are expending your money on for investment purposes, these things apply.

The Investment Process

1) Decide what to buy  –  In the case of house flipping, you are seeking a property.  Before selecting a house you need to understand your goals.  Are you seeking to buy, repair and sell in a short time (active investing) or buy and wait for the price to rise while doing nothing (passive investing) or rent and earn income while expecting the price to remaim at least flat (income investing).  Or some combination of these?

2) Monitor, hold improve or get out – For a house flip of course adding more money to make the investment attractive is obviously the object of this step.  For financial investments this may involve actively participating as a shareholder, attending meetings, voting questioning company management and so on.  Or if this was a passive investment or income investment this could mean waiting, watching, costs being ready for the next step ( or a quick exit if losses loom)

While repairing the house unexpected problems may cause you to dump the reno plans (its getting too costly) take a loss or smaller profit than your goal because it seems safer than getting in deeper and loosing more.  Similar logic can be applied to your financial investment

3) Sell for profit – In the case of flipping, you put the home on the market for more than you paid plus reno costs.  For financial products ask more than you paid plus costs (fees, taxes, etc.).   In the case of income investing you might never get to this step, as long as you have an income stream with little cost to maintain, why bother.