Although most real estate investors seek properties that are in high demand with a relatively low supply, an astute investor focuses on high supply, low demand properties where the pricing can be extremely favorable. The trick to making these investments work is to change the demand for the property, by making simple and affordable alterations. See the following article from Creative Real Estate Online for more on this.

real estate supply demand
Donald Trump makes billions of dollars purchasing run down or vacant properties and building fantastic structures on them. Warren Buffett makes billions of dollars buying "troubled" companies and turning them into financial powerhouses. Little ol' me makes millions of dollars by purchasing hard-to-sell houses and making them dream homes.

There's a theme here. If you look closely at the investing strategies of billionaires, you'll find a single principle hiding in all their actions On the other hand, if you look closely at the investing strategies of struggling investors, you'll rarely find it. What is this principle and how can you profit from it?

The Law of Supply and Demand

You might remember this principle. Your high school Civics teacher probably droned on about it for hours, subjecting you to all kinds of nasty mathematical formulas and charts. If you're like me, you passed it off as economic mumbo-jumbo and went back to sleep.

Big mistake. This one little principle is what separates the struggling investor from the successful one. It separates the bad deals from the good deals. Once I started using it in my favor, I saw my income transform from nothing into over $1 million the first year. Life was so much easier.

Foreclosures: a supply and demand case study

Example: You've heard that the foreclosure market is hot, right? Enthusiastically, you signed up to one of the foreclosure web sites and started bidding on houses in your price range. Then you discovered something. Everyone else is doing the same thing! The clever little banker dumped you into a bidding war, driving up the purchase price and driving out the profit.

What went wrong here? You made an offer on an investment with a low supply and a high demand. Lots of gurus have popularized investing in foreclosures, leading to masses of beginners snatching up all of the lower end houses--for ridiculous prices. If you lost a bidding war, don't feel bad. Chances are, they lost money on the deal.

Foreclosures are an example of The Law of Supply and Demand working against people. You can also make the Law work for you. If you want to buy a good investment, look for the following:

Low supply, high demand: An example of this market is Southern California. Tons of people want to move there and the number of houses are limited. Because of these factors, property is appreciating at extraordinary rates.

High supply, low demand: Sometimes, you'll find a surplus of a kind of property. In Charlotte, NC, for example, the rental...

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