In today’s topsy turvy Real Estate market, many potential players have been scared to the sidelines. Whether it be the buyer who worries that prices will continue to plummet across the boards, or the seller who laments the inability to fetch the same price that was attainable a year ago, there is a lot of market watching going on right now. To be sure, these are unusual times. Before you let the condition of the market at large dictate whether or not you buy or sell Real Estate, though, bear in mind that there is opportunity amidst chaos. Just as the worst investments are often made in the best of times, the best investments are often made in times such as those we are experiencing today.
We all know that buying low and selling high is the name of the game. The difficulty comes in recognizing the apex and the nadir. If it were really doable, we’d all be billionaires. As this determination is only truly made in hindsight, the key is to make the current market work for you, rather than standing around and waiting for the mythical “bottom” as a buyer or “top” as a seller.
So, how does one not only survive, but thrive as a consumer in this tough market? By making purchasing and selling decisions based upon a comprehensive strategy rather than treating each as isolated transactions. Assess your situation, and decide whether the current market will provide enough positives to offset the negatives. Here are a few such strategies that just might make a move feasible after all.
The Move Up Purchase:
The move up buyer is tailor made for this market. Provided that you are looking to stay within the same market, if home values in your area have declined by 10% (purely arbitrary figure), that larger home that you have had your eye on is closer to your reach than ever. If your $300,000 home took a 10% hit, and the $500,000 home of your dreams took a 10% hit, the value difference just shrunk by $20,000 (30k versus 50k in depreciation). Such homeowners need to stop considering themselves as sellers. They are buyers in sellers’ clothing. That too-small home is all that stands between you and the tremendous deals that are available today. Price it right, take your lumps, and you will free yourself to go give somebody a few lumps of their own.
The Downsizing Scenario:
Downsizing to a smaller, less expensive home does not make good financial sense in this market. The factors which work to the consumer’s advantage in the scenario above work to the detriment of the consumer here. But what about the retired couple who doesn’t want to wait for the market to rebound? One way to get on with their lives without taking it in the shorts by selling right now is to consider leasing the home. Assuming that many people in this position will have a substantial amount of equity in their homes, they might even be in a position to draw a positive cash flow by renting out their existing home. They would also be in a position to draw down payment funds for the home they wish to purchase in the form of a home equity line of credit (HELOC). This is about the only scenario in which I would entertain the notion of drawing equity out of a property right now. I have spoken with a few retirees lately who wish to downsize, but don’t want to sell in the current market. I don’t blame them one bit. Putting a tenant in their homes until the market is more conducive to commanding a more attractive sales price may be the way to go.
A More Battered Local Economy (AMBLE):
For the person moving completely out of area, it wouldn’t appear to be a very attractive proposition. You get hammered on the selling end without getting to reap the rewards on the buying side. So what to do? Move somewhere that has gotten hit even harder by the depreciation bug than your community. I admit, this is really more flippant than realistic, but if there are job transfers, family, etc. waiting in hard hit parts of the country, you can conceivably offset the low sales price of your current home with a lucrative buy.
INVEST, INVEST, INVEST!
Along with the move up purchase, this is the biggest no-brainer going. With bank owned property listings, inflated inventory levels and a buyer pool diminished by tightened lending requirements, there has not been a better time to be a buyer since the Gadsden Purchase.
While the resale market at large may have further to fall in value, there is really nowhere left to go for some of the bank property bargains I have encountered lately. There is significant demand for the low end of the price spectrum, with multiple offers, cash buyers and bidding wars in some instances. So when you hear that prices may fall another 10-20% across the board, it’s not going to be on the steals. These properties may pull values down closer to them, but there is too much demand for the low end to keep falling in my humble opinion. There are great values in land right now as builders have basically shut down until they sell off existing inventory. Single family homes are attractive to many as a tenant can largely offset carrying costs. It is a great time to have a few extra bucks in your jeans if Real Estate investment is in your blood.
There are more creative avenues to be explored in this market, but for the purposes of this post, I’ll stick with the basics. The bottom line is that you can benefit from the current market with the right strategy. Money is not only made by tucking more in your jeans, but by taking less of it out as well. There is no such thing as a “BAD” market, nor a “GOOD” market. There is only the market. It’s up to you to bend it to suit your purposes.