The Highs and the Lows

Comments by Patch of The Builder's Blocks

There are all sorts of seminars on “real estate” investing educating people to look at things from the investment perspective and they are great for building wealth and that is part of getting in a position to be able to build or remodel in the future.  But what about today - the opportunities that exist in the marketplace today for people to actually make their dreams reality whether building a new home or remodeling their existing one.  These are the times that people should be shoring up their homes, looking for the right deals to maybe get into that right home because interest rates are at historic lows and historically we know the market is going to turn around.  So why wait until it does? 

Smart investors learn to manage the cycles by buying low and selling high.  The same is true in real estate as it is in the stock market.  You capitalize on conditions when the market is low.  And that is where we are right now.  And again, if you look at history it tells us it is going to cycle the same way.  That is what we have - an economy of cycles and the smart investors work those cycles to their advantage.   So why not do the same when it comes to investing into our own home?

Consider this:  Let's say you are in a home that today is worth $200,000 and that is down by 40% compared to 2 years ago.  Let's say you still have $50,000 in equity.  If you were to sell that home and to take that $50,000 (plus $10,000 for your 20% - example only) and invest that into a home that today is worth $300,000, you might find that based on today's interest rates your payment may not be much more than it is today.  And then if the economy does as it historically always has and bounces back up to conditions of two years ago, theoretically you could pick up another $166,667 in equity (40% recovered on $200,000 versus 40% recovered on $300,000) and more than make up for your loss between 2008 and 2010.  That is the way investors think.  It is a matter of mind-set.  Your loss today is on paper, so work with it so that when things turn around you are in an even better position.  

I am not a financial person and I am not in real estate and there may very well be some other costs in here, in fact that almost goes without saying but the point still stands - the percentages just may be slightly different but you get the point.  We are talking about paper losses and we are talking about relative gains.  Common sense tells me that overall this makes good sense.  So talk to a professional and at least explore the possibilities because you may just find that an opportunity exists to take your standard of living up another notch.