Knowing When To Buy and When To Sell
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Knowing When To Buy and When To Sell

A short essay on knowing when to get in and get out with a focus on the wider picture of the real estate market. Understanding that the boom/bust is a cycle which will be repeated. The only way to lose is to waste money purchasing something that won't increase in value to the extent that it makes no sense to buy it today.
The Housing market is a roller coaster, in most cases. Yes, there are those permanently upscale/downscale areas in which the land on which the edifice stands is the base value. But most areas rise and fall based on outside criterion. Most areas are effected by the general economy; when there is inflation the value is higher than in a recession. How much it cost to build the premises, how much it could cost to rebuild today, is not a factor when one is either in a sink or on a rise. Hence, the great housing boom of the early 2000s was met by the Crash in 2008. The fact that the building itself might have cost $20,000.00 (random numbers) to build in 1997 and the fact it would cost $28,000.00 to rebuild today is not factored into the price, which could be $50,000.00 during a 'boom'. During a 'bust' one might not get $25,000.00 for that house. One of the unknown factors was that property in New York City, primarily Brooklyn, has been on an unceasing upturn for years. While palaces were auctioned for the price of a studio in Florida, houses that had cost less than $20,000.00 to build in 1950 were going for ten times that in 2000. If one had bought that house for $20,000.00 in 1953 and sold it in 2007 for $200,000.00 they could buy a palace in Florida in 2011 for $50,000.00 and bank the rest. This is the kind of 'windfall' people imagine but rarely obtain. It is clear to any dabbler in real estate, that many of the auctioned homes which are going for cents on the dollar are fantastic buys. But one has to hold them for a few years as the market will rise. However, learn the value of the land on which the house stands. If it is low value land, the appreciation may never arrive, in fact, you may be forced to sell for less than you paid for it. If the value of the land is increasing, even if the house needs extensive repairs, it may be a brilliant purchase, for you will pay far less for the land than it is worth. Many extremely run down properties in developing areas can be repaired and sold for five or six times what you paid for it. Finding these gold mines requires a good eye and a small competent team. The property purchased for $25,000.00 with $10,000.00 worth of repair can quickly sell for $50,000.00, and where the area is 'hot' can be held a bit longer for much more than that. However, regardless of the price and value, one never buys in a 'ghost town' or on the fringes of a rapidly declining area for the possibility that the home will increase in value is highly unlikely.

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Comments (1)

What I know is if your house is $200,000 under water you are not selling.  Period.