The Practical Way

The formula for valuing assets

In one of his letters to the shareholders of Berkshire Hathaway, Warren Buffett told them what is the formula to value any assett.

The formula for valuing all assets that are purchased for financial gain has been unchanged since it was first laid out by a very smart man in about 600 B.C. (though he wasn’t smart enough to know it was 600 B.C.).

The oracle was Aesop and his enduring, though somewhat incomplete, investment insight was “a bird in the hand is worth two in the bush.” To flesh out this principle, you must answer only three questions. How certain are you that there are indeed birds in the bush? When will they emerge and how many will there be? What is the risk-free interest rate (which we consider to be the yield on long-term U.S. bonds)? If you can answer these three questions, you will know the maximum value of the bush ¾ and the maximum number of the birds you now possess that should be offered for it. And, of course, don’t literally think birds. Think dollars.[...]

Be successful like Donald Trump, part 5

I finished watching the fifth series of “The Apprentice” recently and it is time to write the usual summary about Donald’s advice to be successful. The people who are regular readers of this blog should know by know the main themes from the previous series. Series five moves on similar lines. The focus of Donald Trump should be clear by now.

Donald’s advice follows again the main lines of the previous four series. I think that he has made his point in the previous episodes and now he just repeats it over and over again. That is good in a way, because you can understand which points he stresses a lot and which ones are not so vital. And as the ancient Greeks used to say “Repetition is the mother of learning”.

His advice on series five is the following:[...]

Be successful like Donald Trump, part 4

The fourth season of “The Apprentice” was one of the best. The candidates were very strong and you are glued to your couch till the last minute. The final 2 are very both great and there is a little twist at the end of the series.

Donald here repeats his valuable advice through the series again. The topics are similar as the previous ones and you start to understand how he thinks. He focuses again on the importance of money, always thinking big and having a winning team around you. You can see that this is how Donald has built his empire. He combined these 3 elements (and a few more) and he built his empire. The tasks that the teams perform follow similar concepts as the previous series. They range from marketing, to selling, to creating ideas and of course teamwork and leading people.

Here is the advice given from Donald Trump in the [...]

Be successful like Donald Trump, part 3

After watching Series 1 & 2 I was really looking forward to watch the third one. I find the advice that Donald gives valuable and I think it can help people become winners.

The third series of “The Apprentice” is full with more advice on the same topics. By now you will start to see certain topics repeating themselves. Donald is big on thinking big and leading with authority. This is where Donald places his focus and what has helped him to build his empire.

It is surprising that Donald refers to the same topics again and again. The candidates in the series keep doing the same mistakes. Please make sure that you do not repeat your mistakes. Learn from them and improve.

Here is the advice from Donald Trump give in the third series:[...]

Be successful like Donald Trump, part 2

Last week I covered the advice that was given by Donald Trump in the first part of the series “The Apprentice”. This advice is covering practical ways that can help people become more successful in business and become better leaders. I think that these are steps that Donald has followed and he lives by. These steps have helped him to build his huge empire and become a billionaire.

The second series continues in a similar style. A new group of people face business challenges every week and hope to work for Donald. The tasks are similar to the first series, but the pressure is more and the deadlines are more aggressive. Donald continues to evaluate the performance of the teams each week and give feedback and advice.

Here are his gems of wisdom from the second series:[...]

Be successful like Donald Trump, part 1

I came across the other day a series called “The Apprentice”. I am not a big fun of reality TV, but a friend recommended that I should watch this, because it is different and full of practical advice on how to succeed and run a business. As you know by now, I am very interested in practical advice and I thought of giving it a go and see what Donald Trump has to share.

I was pleasantly surprised by “The Apprentice”. It is all about business and how to be successful. Each week Donald gives the candidates a business task to complete and then at the end he judges them on how they did and gives his advice on what they did wrong. The tasks range from creating products to marketing to creating and running a business. The advice that Donald gives is great.

I was pleasantly surprised by “The Apprentice”. It is all about business and how to be successful. [...]

“Successful Property Letting” by David Lawrenson

I was curious about this book, because it was written by a UK author and it covered how to let your property in the UK market. Its reviews were good and I decided to have a look. After I finished reading it I agreed that it is a very useful and informative book.

David is very down-to-earth and he explains in his book the whole process of how to search for a property and how to select the appropriate one. He gives guidelines on how to rent it and most importantly how to manage your tenants. In the end, he gives more advice on tax and other general issues. As the title says, he puts more focus on the letting side of property than on the buying side. He covers the buying at the start of the book, but the main focus is on how to be a successful landlord.[...]

Positive cash flow from investment property

For a long time I was searching to find a way to calculate if a property is profitable and I should buy it. I was looking at the cash flow and at the value appreciation of it over the years.

Many property investors were talking about the importance of being able to cash flow a property and the need to have a positive cash flow at the end of the month (or at least a break even). What no one was telling was what you need to include in these calculations. So, after a lot of search here is an extensive list of items to include in the calculation. This list is quite strict and you might need to relax some of them. I have included here everything for the benefit of you and you can make the call if you want to ignore some things. But do it with your eyes open and knowing the consequences. [...]

The best investment property

I have been looking for a long time for a way to evaluate if a property is a good one for investment or not. There are so many properties on the market, but which one is going to make me the most money? That is the question.

I would like to make a distinction here before I go ahead. This article is about properties for investment. It is not about your dream house/flat. You should keep this in your mind all the time. Based on this you should throw all your emotions out of the window. This is all about the numbers. We are looking for a property to make money and not one that looks nice. Therefore, we will at the numbers and not if the living room is cosy. [...]

The biggest property market dilemma!

I have spoken to a lot of people about the property market in the UK and most of them seem to be caught in the eternal dilemma of buying or waiting for things to get better. Of course, the funny thing is they all say that this is not the right time to buy. They say that all the time. If the market is going up they wait for it to go down. If the market is going down they wait for it to go even further down. I think that what they lack is the gut to act and the knowledge on how to invest.

People wait for property to get cheaper and then they will buy. They wait for the prices to hit the bottom and then the great opportunity will appear. The fact is that they will never know where the bottom is. Usually they miss it and they start to buy when prices start to increase again. After a few months, you hear them say “I should have bought earlier”. Yes, you should. [...]