Being in the Real Estate industry, the number one question I am asked most frequently is, “Is this a good time to buy/sell?” Being the guy that wants to be your trusted resource and one you can lean on to make your Real Estate decisions, I struggle with giving this question an answer a lot!
So here is the mantra I constantly refer to when it comes to questions and/or scenarios like this: “Don’t try to time the market, let the market time you!” Its that simple. If it makes financial sense to buy, then buy. If it makes financial sense to sell, then sell! But for those that want more from me than this high-level advise, let’s dive in further…
Let’s talk about the market today. As you can tell from the table to the left, we’ve had some pretty great growth over the last handful of years! So if you bought property locally in 2011, the market’s timing was in your favor. In fact, if you purchased anytime in the last six years you’re sitting in a great position! But where are we headed? That’s the million dollar question, and the truth is, nobody knows for sure. The only thing we can do is to study the past and present and make our best educated guesses. Which is where I am currently sitting with a few of my properties within my portfolio today. They have appreciated along with the rest of the properties locally, and I am now looking at unrealized substantial equity gains that could be captured and re-purposed should I decide to sell them in today’s market. And so, the question I keep pondering is, “Are we near the top?”
Real Estate is on a continuous cycle. Its almost always moving up or down, just seems to do so at different speeds in different portions of its cycle. I’m sure most everyone remembers how fast it moved through 2002-2009. It moved very fast in both directions up, and then down! And although I say it moved fast, the reality is that it moved up for roughly five years, leveled off, and then down for roughly 3 years. So fast is a relative term here. But using the last cycle as a reference to the present cycle, we’ve had growth years from 2012-2016, five years. And from the table referenced above, the median home price seems to be appreciating at a slower percentage than previous years.
Could this mean its starting to level off at the top? Does this mean we’re looking at another big drop? My gut tells me that we’re not going to see the same kind of drop as last time, much like this last rise. It has been slower and less dramatic than the previous up-cycle. But I do feel like the market is showing me that its starting to level off.
So back to the questions at hand. Do I buy now? My short answer is no. Not unless the deal cash-flows and makes financial sense to buy and hold for the long run. This is not a time for speculation and trying to time the market to make a quick profit.
Do I sell now? If you have a place to put the cash from the sale that will safely generate a decent return, I say yes. That’s my plan with a few of my properties I currently hold in my portfolio. In fact, I’ve just closed escrow on a condo that I purchased in 2012 for $150,000.00 and sold last month for $232,000.00. I’ve taken the cash and placed it into another escrow to purchase a four-plex that should be closing within the next 30 days or so. It gives me four doors for the price of one, creates monthly cashflow for my family, and provides better leverage with bank financing than the condo had. This is the win-win scenario I’m constantly looking for.
I hope this post helps you progress in your Real Estate Investing journey! Remember, one step at a time…