Jewelry investment as a RE primer and fear managing tool
Hello RE friends,
In an effort to move beyond theory (e.g. reading, speculating, postulating) and into practice there was a need to invest in a commodity.
Commerical paper doesn't seem as interesting because it's largely an intangible.
The process of securing a piece is much like RE in that it must satisfy a few things:
1. Have an asset desired by a buying market
2. Acquired at a signficantly discounted spread below retail
3. Hold for appreciation or sell for capital extraction.
Just a few days ago I purchased a bracelet for $745. 10K (not the best) & 5.8 ct. weight of diamonds. I immediately had the piece appraised and was surprised at the mark up above retail ($2,435)
(Great exercise akin to the conversations that take place here about valuations of RE based on BPO and etc. compared to prices absorbed by an end buyer).
Appraisal came in at $2,845. Appraisal fee (just as in RE) $150.
Actually, the labor involved in the appraisal is probably less since it took all of 15 minutes. Inspecting a house is much more time intensive.
Will purchase a few others with an intent to sell during Q1 of 2011. Already placed a beta ad to guage buyers and had many responses at a price of $1,800. Projecting to sell at $2,000 which makes for a 53% cash an cash ($40 insurance) uptick.
Great exercise because walking into the store the emotional part of the transaction was quite palpable. I had doubts which were amplified by the length of time the saleswoman took to finalize the sale. Important to recognize irrational fear when it creeps up as I'm sure it happens when bidding on property.
Thank you for the input but I cannot share that view. At this point, developing an understanding of my mental process whenever I spend money is crucial to my long term goals.
Investing is a personal endeavor and we may just have differing goals which is the beauty of individualism.
#3 Off Topic Contributor
- Investor
- Viera, FL
Originally posted by David Breitzmann:
Investing is a personal endeavor and we may just have differing goals
There is one goal with investing and one only.
MAKE MONEY.
This isn't bigger smiles, bigger hearts or bigger consciousness. This is Bigger POCKETS.
#3 Off Topic Contributor
- Investor
- Viera, FL
Originally posted by David Breitzmann:
At this point, developing an understanding of my mental process whenever I spend money is crucial to my long term goals.
I'm going to help you with something here David. Your mental process doesn't matter here. What matters is about 4 feet south of there. Do you have the balls to invest in real estate?
Spending $745 is nothing like putting your butt on the line for $40,000.00 (a small number in real estate). $745 you can make and spend without it impacting you greatly. You screw up tens of thousands or hundreds of thousands or millions of dollars and it's a different ballgame. Real estate is a very simple game. It's just not an easy game. It doesn't take understanding your mental process to invest in real estate. It takes a serious set of brass balls.
You will never experience the pressure to make sure you have your butt covered and your exit strategies solid as when you sign paperwork that puts your butt and your own or other people's money on the line.
I knew I was truly investing in real estate when I started signing closing paperwork that scared me to death. It scared me into finding ways to create money out of nothing to make deals happen. It scared me into doing this right. $745 for a bracelet is a mental exercise in being a consumer and I would hope your long term goals are to not be a consumer. You may be able to resell it higher, but it is nothing compared to real estate.
Take that $745 and put it on the line by making it earnest money on a deal that you will LOSE if you don't wholesale a property but will make you a couple to 5 or 10 thousand dollars if you successfully wholesale the property and now we're talking about the mental process you need to be a real estate investor.
I do not apologize for pursing greater understanding and we certainly diverge in principle.
This doesn't strike me as efficient. No love lost and be well.
#3 Off Topic Contributor
- Investor
- Viera, FL
Originally posted by David Breitzmann:
This doesn't strike me as efficient.
I'm a German protestant. I don't take a leak that isn't efficient. I'm using the energy from this thread to finish out another deal and I used info from this thread to get another great business idea going. I'll let you know what it is when I get it launched.
Now get yourself focused on real estate.
I agree with Tim. Focus is the key to success. Whenever I try to do too many things or I get distracted by the latest fad or get my eyes off the ball, I lose and I get hurt financially.
david, you seem very intelligent...much smarter than me, but when i read your posts, i'm some times reminded of 'paralysis of analysis'...it's great to analyze and plan things, but some times, there's something to be said for learning by doing as well..best of luck
I should have added to my "car investment" that I went to the auction to actually get myself a vehicle to drive in the conditions where I live. (For those that don't know, Colorado is the King of Cracked Windshields, per capita, in the US). During the auction, I noticed the prices and told my wife that we could buy a second vehicle and make enough profit to pay for the trip. So I bought myself a four wheel drive Trailblazer and a nice Blazer to resale. We bought it on Sunday, sold it on Wednesday with a little over $2,000 profit. Oh yea, one mile from home (auction was in Denver, we live near Durango, 400 mile drive), my wife shattered the windshield on the Trailblazer, oh well :roll:
The point being, I was ready and knowledgable enough to put $7,000 on my Credit Card, knowing I could resale it. The same thing goes about Real Estate. You can research, research, and research, and then a deal, an idea, a possibility pops up from out of no where and you have to act, NOW. People will think that you are just lucky, but you know the thousands of hours you put in before "LUCK" came knocking on your door. So instead of $7,000, can you write a check for $70,000, knowing that you can sell for $100,000 or more? Or will you be like millions of people who paid $70,000 and sold for $30,000 a couple of years later? They thought they had a good deal because a 'friend of a friend' bought a house in that area last year for $80,000, so this has to be a good deal. Too bad they didn't know about the 17 foreclosures and the 3 that had sold for $20,000 apiece.
Although parts of real estate investing may be similar to other types of investing, the "Real Estate Investment" is a unique animal, all its own. I do not want to sound harsh or critical, and the OP meant well, but a Jewelry investment is not a RE Primer. The aspects of real estate are many and the slightest change makes a huge difference. Even the best of investors on BP will tell you that they still have a lot to learn. And we all learn from each other here, which is why we all LOVE BP.
Hey All,
Thanks for the comments. Tim, I'm from Germany so we share that.
I hear that Bryan,that was part of the exercise, to get out there and do something.
The focus is REO properties, Q1 of next year. Until then, learning and meeting other investors in the area is the focus. The advice is appreciated and I know everyone has good intent.
Mike, I hear you, an animal which one must successfully wax of its' fur without getting bitten - no easy task.
Let e'r rip!
i can appreciate your willingness to learn so much before stepping into it...how much confidence, in respect to real estate investing, have you gained from this jewelry exercise?? if it works, power to you man....i belive it was tim who suggested to get out there and put something under contract...make something happen....why are you so bent on waiting a full year?? i know it's your philosophy, so understand that i'm just asking, not judging...--bryan
$745 for a diamond bracelet is a very good investment if you have a wife or a significant other. It should get you a great pay off.
I think what you are trying to do is to make a few investments in jewelry, sell them all at the same time and use the money to start your real estate investing.
Just be aware that there is a lot to know about jewelry and it isn't all that easy to sell. Investment grade pieces are very expensive and the market flucuates wildly. There are a gazillion ways to get cheated when you purchase.
If you want to get involved in the jewelry market, start studying. Also, you will need to purchase some moderately expensive equipment to evaluate the jewelry that is offered to you, both the metal and the stones.
You can buy jewelry just like you buy real estate. Look for distressed buyers who are desperate for cash and willing to sell their jewelry to raise a couple of dollars.
But you have to be able to tell if the metal and stones are genuine and be able to evaluate the quality of the stones.
You also must know the difference between retail and wholesale value. Believe me, wholesale is a very tiny fraction of retail.
Lastly, you must find some way to sell it at a profit. Generally, buyers are very susicious because there is so much fraud in jewelry and that is general knowlege.
#2 Off Topic Contributor
- Real Estate Investor
- the villages, FL
OK- I didn't want to admit it, but I sometimes buy diamonds. I recently bought a .9 carat from a lady that advertised on Craigs List in Ft myers, fl. Her sons' tuition was due and he had no money(stupid lady) She was divorced and had sold other jewelry before. This was her last piece she said. The appraisal said "near colorless" and the grading was something like"no visible defects".
I'd never heard of this grading system and thought it was phoney. She gave me the name of the store in Boston and it was still in business. They said that in the 70's , there was no letter grading like def,ghi,jkl.
The lady wanted 1500 and I offered $900. She said no, but called me back a few days before tuition was due. We did the deal. I took the ring and diamond to a GIA appraiser and he appraised it at $9100. I did ok on that one. 10 times price in appraisal, I can live with. Rich
Bryan,
Thanks. It was an intense experience. I tried very much to be present. Very easy to understand how those at RE auctions & etc. can get carried away and move far beyond their max offer.
What I find interesting is that many of our normal purchases, eg vehicles, are money pits. Yet, we've become very conditioned that its just the nature of that animal. My own thought is to evaluate purchases based on their ability to appreciate.
Just my own thought-experiment.
P NW,
Agreed on all fronts. Selling will be difficult and will require aligning a few actors and should be informative for the overall sales process of larger items. I have a background in fundraising so it's simply adding another hue to the overall picture.
I plan on presenting the buyer with the formal appraisal and giving them 10 days to have it appraised. If unhappy, they can rescind for a full refund.