FireDream

There is No Crystal Ball in Real Estate

My friend Julie always had the worst luck when it came to real estate.  If there was a wrong time to buy or sell a home, she would find it.  After some friends bought a condominium, they encouraged her to buy one in the same complex.  She paid a little more-about two grand or so, but she had a more desirable floor plan.  When her friends moved, they sold for $85,000, making a profit of about $10,000.

Julie sold hers a couple of years after they did.  The condo that she bought for $78,500 and put $5,000 in for improvements she sold for…$80,000.  Yep, a loss of just over $3,000 when you consider the improvements.

She then bought a home in the suburbs, paying $165,000.  It was a great house-all brick with big bedrooms and an amazing view.  Unfortunately, due to an out-of-state job transfer she ended up having to put it back on the market six months after she moved in.  After having it on the market for five months, she finally sold it for what she paid for it-and felt pretty lucky to break even.

Within another six months, the real estate boom hit the area, and the value of the property skyrocketed to over $220,000.  Oh-and the condo that she’d previously owned?  It sold shortly thereafter for over $90,000.  In short, Julie lost out on about $73,000 total in equity gains in two properties.

Now the real twist: Julie was in the mortgage business for almost 10 years.  Her job was built around the process of buying, refinancing, and selling homes.  You think that she’d have had all of the inside information on when and where to buy, right?

Well, here’s the cold hard truth: Despite all of the house flipping shows and get rich quick infomercials on TV, the fact is that nobody has all of the answers when it comes to real estate.  Although some people seem to have an amazing sense of luck when it comes to buying and selling real estate.  Although some people seem to have an amazing sense of luck when it comes to buying and selling real estate, none of us gets to have a crystal ball that we can gaze into to know exactly when and where we should buy.

Here’s what I do know: real estate ownership has been, historically, one of the best investments you can make.  You just need to be smart about it.  When you’re looking at buying a primary residence, buy one that you can afford-and buy one that you truly like.  This is your home.  It’s not a money market, it’s not a CD, it’s not a bank account.  It’s where you’ll eat, sleep, hang out with friends and be with your family.  Over the years, it is likely that you’ll see some form of appreciation in value.  It may take two years or it may take ten.  But if you buy a home that you’re happy in, it won’t much matter.

Oh-and here’s some good news about Julie.  Her luck seems to be changing.  The house that she bought in Billings, Montana four years ago for $145,000 is now appraising for $180,000.  After 15 years of homeownership, she’s finally starting to build equity.  But best of all, she’s living in a home that she really likes and that suits her and her family.  Hopefully, we’ll all be that lucky in our real estate ventures.