It is always interesting when people refer to the market as a ‘buyer’s or seller’s market. Depending on where the market is situated in the cycle, both will certainly have more leverage over the other. If there is a surplus of supply and low demand, buyers have more leverage in negotiations; however, the reverse is equally true. When a market isn’t too polarized (e.g. following The Great Recession), this “leverage” is more hype than anything else. You might consider me crazy for saying this, but let me give you an illustration.
A couple has been living in a market that is hot for the past 10 years (i.e. Austin, Seattle, Denver, etc.) and is now contemplating putting their home for sale. The demand is high, and the inventory is scarce. This is a “seller’s market. It is possible to make significant profits from the equity that appreciates with the time they own in their home. When they start to see dollar signs and think about how they could utilize that “paper wealth’ to pay for an option to pay for their dream house in a better community. Although it’s all right and good to think of big goals, there’s an issue with this idea.
Selling your home in a market that is hot isn’t necessarily a guarantee that you’ll profit if you plan to remain in a market that is hot. Let’s suppose they take any equity tax-free (~$200k) generated by selling their house and using it to purchase a 1 million dollar house. It’s great, they have their own amount of 20% paid, however, their monthly payments are significantly more expensive and in the overnight period they went from being paper rich and house-poor. The couple chose to move from the strong side of the table to move to the weak side. I’ve seen the same thing from the side of the residence often. Similar to the Investment and commercial side. A person has lived in an office or apartment property for a while and would like to convert it into a larger property to create long-term wealth. I like the idea, and intend to use this method for myself in the near future, however selling in a market that is hot isn’t going to be a great idea even if you’re buying in a volatile market. Furthermore, the tax advantages of 1031 may become a burden if investors feel trapped to make a poor financial choice to kick the tax bucket down the road.
If you’re not willing to alter the markets, and asset classes, or invest in genuine money, you seem as if everything is washed as washed. In the end, like beauty Investing in Real Estate, it’s dependent on the individual’s perception and perspective. Many might argue that there aren’t any deals in Austin, since everything is costly for some reason or other. Investors from San Francisco or New York, However, might think they’re getting a lot of their lives. A person’s trash could be someone else’s precious treasure.
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