A very popular investment in construction. You invest money and under the contract the construction company is obliged to provide you with an apartment or commercial real estate in the new complex after a specific period of time, for example 2 years.
Having studied the contract, you can simply determine for yourself the term of this investment as a medium-term one. And everything may be so. It may be true that the terms of the contract will be fulfilled by both parties and for the amount invested money in 2 years you will receive your premises. But there are many factors that can translate the medium term into the category of long-term and even lost.
Since, not you manage the money, you get a good resource – free time. In addition to it there are a lot of risks: a construction company can drag out the time; go bankrupt; or just be scammers.
A change in the investment period can happen if you buy a finished property to rent it out. You will set a goal to return the invested money after 5 years by calculating the cost of renting in the area. Everything can be as you plan. And a situation is possible when the cost of renting real estate begins to fall or there may be a local problem. For example, a garbage recycling plant will be built in this area. So the prices for renting real estate there will drop sharply or the house in which you bought the apartment for rent will be settled by African Americans.
There are many examples when short-term investments become – long-term, medium-term too can easily become long-term. But very rarely, long-term turns into short-term.
How to correctly determine the investment period.
Each specific one needs to be considered and analyzed separately. Identify all the factors that can affect it and consider each separately, giving each an assessment in terms of the likelihood of its occurrence.
At first glance, the investment may seem short-term, then we begin to analyze the possible risks, upon which it can turn into either medium-term or long-term. If in the analysis of risks and threats, at first glance, the short-term one does not have the opportunity to become long-term, this is already good. Then we look at what are the options and risks of transitioning it to the medium term. It is important correctly assess the probability. Take a scale from 0% to 100%. If your short-term investment has a 50% or 70% probability of becoming medium-term, then you need to relate to it accordingly.
That is, in this case, making a profit in the short term will be a very good and joyful outcome. Still, planning to make a profit is in the medium term if the probability of its transition to the medium term is 50% or more. You understand the algorithm. This must be done in each case. Analyze all the possibilities of changing the term, determine the percentage of probability for each of the possible risks, then make decisions.
But remember, any investment is an opportunity to receive both profit and loss. To achieve success in investment activities: divide your invest portfolio into parts and invest in different projects, choose those areas of investment in which you are well versed and do not believe anyone. I wish you success!
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