Home / Investors / Why trying to time the real estate market can backfire. Episode #256
Why trying to time the real estate market can backfire. Episode #256
Hello! Welcome to Todd Miller TV. I want to do a quick update on Short term Real Estate strategies here in Las Vegas. As you’re probably aware, if you saw the last video I did about the shadow inventory, there’s a lot of people saying that there’s gonna be all these houses at the market next year and prices are gonna collapse. So there’s all these people out there saying that they’re selling their portfolios and they’re gonna wait a year and buy them back up. Buy the same properties or but similar properties because of the/they’re trying to time the Real Estate market so to speak. And I wanna talk about why/personally I’m not gonna do that. I think it’s a terrible idea. This is why: Imagine that you have a house and we’ll just/we’re just gonna pick numbers here ’cause I need/I’m gonna use numbers for examples. We’ll just say it’s a $90,000 house. To get you a $1,000 a month in rent which is non-unreasonable. That’s a completely reasonable/I have properties that are just like that. And okay. So, and you think prices are gonna fall 10%? No, they’re gonna fall 20%. That house, is gonna be worth $70,000 next year. Which would be amazing if that really go that far. Okay. So you’re saying I’ll sell it for 90 wait a year and I’ll buy it back up for 70,000. Okay so, you’re gonna take $90,000 and you’re gonna sell the house. So you’re gonna pay probably $8,000 in total cost. maybe more. You’re gonna pay Realtor’s commission, closing fees, you’re gonna pay for HOA documents, you’re probably gonna have to pay for some of the buyer’s closing cost or whatever. So you’re gonna give up that money right there, then what you’re gonna do is you’re gonna loose out on rent which $1,000/month is $12,000 so now you’re down to the $70,000 because you lost that potential rental income. And you’re gonna go back to the process to find another house and buy it? And guess what? There’s cost when you buy a house. You’ have to pay title fees, escrow fees, real estate transaction fees, and inspections again, and your time and your effort. So you know, if prices are gonna fall 10% or 15%, you got a $100,000 house, you’re getting that rent. So why give up the rent for your/just doesn’t make sense. Then here’s the other thing, what if prices don’t fall? What if they go up again. Now, even if prices stay the same. You come back in the market a year later you’re not gonna want to because you’re convinced it’s gonna fall so you wait and wait and wait. And then it goes up and up and up and then you’re like “Darn”, and then starts “Why did I sell at the bottom of the market?” So this thought that there may be this little mini bubble and it’s gonna go back down and back up unless you believe it’s gonna completely crash and houses are gonna be worth nothing, it doesn’t make sense to give up that revenue you’re getting every month on a house. Transaction fees here, transaction fees here, commissions and everything else to sell a property, trying to time the market. I don’t think it’s a good strategy. Investors who buy long term here in Las Vegas don’t do that. And I’m not recommending that to any of my investors. The thing is a terrible idea. And I’ve told them this “Look, if house prices go down $1,000/month you’re totally insulated ’cause you’re getting that in rent.” So you know, what we’ll do is wait a year and if prices go down, let’s buy some more ’cause it would make total sense to do that. Right? Anyway, I thought I’d share that strategy with you and my thoughts on that ’cause I’ve heard a lot of people say that and it just to me it doesn’t make sense. So anyway, that is my update and hope to see you n another video. Thanks!