For years, making a killing in real estate was easy. All you had to do was to hold on to your home. People doubled, tripled, and quadrupled their money just by living in hot areas of the country.
We all know what happened next. A few lucky people cashed out at just the right time. As for the rest — we’re still dealing with the aftermath of their stories. And many people are wondering: Did I miss the right time to sell.
A unique asset
First, remember that your home isn’t like other investments. When housing prices are up, your four walls and a roof may be the best investment you’ve ever made, but pocketing the profit is just half of the process. There are property taxes to consider and school systems to research; commutes to be calculated and condo fees to be factored in.
And guess what? If your house is worth a lot, odds are any house you’re interested in moving into also has a hefty price tag. You can always find a rental, which isn’t a bad option — if you successfully time both the top and the bottom of the real estate market.
Home, sweet investment
As a homeowner, you’ll find it easy to think of your home as a piece of your overall portfolio. You’re the CEO of 1412 Maple Lane. Make the most out of this piece of your portfolio by making sure you aren’t overpaying for your mortgage, and that you are making necessary upgrades to extend the life of your home — and enhance your time there.
In fact, you should approach the housing market — your housing market — with the attitude of a buy-and-hold investor. Long-term buyers know that they will most likely be rewarded, despite the market’s day-to-day ups and downs. Time in the market is a lot easier than market timing.
Granted, things change. It’s pretty rare these days for people to live in the same area for their entire lives. Depending on where you move, you might find yourself in a totally different real estate market, with different price levels and available features. But if you’re lucky, you’ll always be able to at least maintain your standard of living when moving from house to house — thereby enjoying the slow but steady profits that rising housing prices have given homeowners over the decades.
Hot or not
Whatever history tells us about this time period, remember that a home is where you live. Its value in your asset mix is more than a number on a piece of paper. But you already know that. And, honestly, after a weekend of watching homes being razed, refurbished, tricked out, flipped, and traded up on cable TV, we can’t blame you for wondering whether you should have dumped your house at the peak and rented a place until everything cratered.
But while hindsight may be perfect, we don’t have a crystal ball. And with your home, it’s an all-or-nothing proposition. You can’t just take a portion of your profits — say, sell the third half-bathroom with the bad ’80s wallpaper and the seldom-used dining room and unfinished basement.
So if you want to make a killing in real estate over the years, the right time to sell is never. By moving only when your needs change, you spend less on costs such as listing fees and mortgage loan charges — and you benefit from the slow appreciation that real estate has offered over time.