Selling Your House so You Can Rent??

Filed under: Market Comentary

Recently, I’ve had several people tell me that they are selling their real estate so they can wait for the crash, then buy back into the market again. From my perspective as a real estate professional, this idea doesn’t make sense. Here’s why:

Timing the Market

On the surface, this strategy might seem like a good idea: buy low and sell high, and then cash out and repeat the process. The real estate market is high right now, so why not cash out while home prices are up?

The real variable in question is timing the real estate market. For most people, timing the market ends badly. If you have a lot of experience in the industry, the right tools, and in-depth knowledge of the industry, then it might be worth a try. But, the majority of us won’t get the timing right, and end up costing ourselves a good chunk of money.

Plus, none of us really know if another real estate crash is coming. The market has been strong, making it difficult to predict future trends.

Long-Term Real Estate Strategy is Best

For example, there are a bunch of people who get it wrong. Many people bought high in 2006 and 2007 and then sold at the bottom of the market after the industry crashed in 2010. We are 10 years out from the worst of it at this point… consider the fact that if you had rented through that whole time, you would have wasted money on rent and missed the equity that was available.

On the other hand, if you would have bought high and held onto the property for these 10 years, it would have worked out for your family. Even if you started with zero equity and you bought at the most expensive time, you would have missed out on 10 years of amortization. On a $400,000 loan, we’re talking about $90,000.

Right now, we are at or above the values that we saw in 2008. Factor in the amortization, and you can see that the long-term strategy would have paid off to hold onto the real estate.

Why Renting is a Bad Idea

If you decide to sell high right now and rent for 4 or 5 years, consider the amortization that you will give up. Buying in a few years will reset the 30-year mortgage: what is the cost of that?

My suggestion: stop selling good assets! If you have a good home, then you need to look closely before choosing to sell. If you have questions or want to have a conversation about this topic, feel free to contact me anytime. Please like or share this video if you found the information helpful!

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