When it comes to investing in Florida timberland for sale, investors will review certain information and perform an investment analysis to determine whether or not the investment is a good deal. Quite often errors are made during these analyses, which may alter the results and sway the decision of the investor. There are a number of commonly made errors that investors should be mindful of, including:
Excel is one analytic tool that is very popular among investors who perform investment analyses on timberland for sale in Florida. While this tool is extremely helpful in simplifying the process for analyzing certain information about an investment, there is quite a bit of room for error. Some of the most commonly made errors with using Excel are associated with “relative” and “absolute” referencing and formula setup.
Another commonly made error during investment analyses of Florida timberland for sale involves the inappropriate application of investment principles, such as selecting the wrong formula, mixing real and nominal discount rates, comparing before and after-tax results, misapplying cash-on-cash return, and comparing investments of varying time periods. These errors are commonly found in analyses that compare timberland investments with alternative asset classes.
Errors of Omission
Errors of omission relates to pertinent information that was either purposely not gathered or left out of the analysis out of negligence or naivety. These types of errors can be extremely problematic as the omission of certain information, such as relevant costs and potential revenues, can significantly impact the results of your analysis. As such, it is important for investors to confirm that the assumed costs and revenues are indeed accurate and a reflection of available information.
How to Avoid These Errors
One of the easiest ways to minimize the chance of making errors on the analysis of timberland for sale in Florida is to formulate a strategy for information gathering. When gathering information for your investment analysis, it is helpful to have a list of all the information you will need to make an informed decision that can be checked off as it is collected. After all the necessary information is gathered and properly entered into your spreadsheet, we recommend having your analysis reviewed to ensure accuracy and appropriate evaluation.