11. Weigh the pros and cons of Buying vs RentingDec 12, 2019
I know I am going to get some slack about this, but do you really have to own your house? Now? The older I get, the less I like being an owner and the more perks there are to renting. If something breaks, I don’t have to add it to my husband’s already-too-long “To Do” list. I can just pick up the phone, call the management company, and they’ll send someone right over. Done. I do this with our place in Florida and I love it. Check out my blog about Buying vs Renting on my website.
I also know that we are headed for another real estate drop when the dollar adjusts. Imagine your home’s value dropping 50-60%. What would you do then? This could very likely happen again in the very near future (I’m writing this in late 2017). A shift is coming and I would rather sell high and buy low…again.
We just sold a 5,000 sq ft home in Arizona. I purchased that house at auction for only $375,000 plus fees in 2008. The previous mortgage was $800,000. It is now 2017 and the home’s value just passed $500,000 for the first time since the crash. Selling a little before the peak is better than gambling on the peak and having to sell low. Bonuses of selling before the peak are putting your equity somewhere safe and buying low in the future when there will be plenty of deals.
We are ready to downsize as our children grow and leave home, but that is not the only reason for selling. I listened to what the experts were saying and sold nearly all my rental properties in 2004 and 2005. When the bubble popped, we were left relatively unscathed because I had sold most of our rental properties, even those that were cash flowing extremely well. At that time, my mentor, Robert Kiyosaki of Rich Dad fame, had said, “if you can’t cash flow the property at half the income, sell.” I did. And for the first time, the rental prices dropped all around the country, even in the areas I had been holding. The values went down to a quarter of what I sold them for and the rents dropped like a lead balloon. I would have lost everything and it would have been a struggle all the way down, had I not listened to his advice.
Now, the same experts are warning us again. Take heed and remember the big lesson. Your home is NOT an asset. Assets put money in your pocket. Liabilities take money out. People were treating their homes as assets. Worse, they were treating them like assets that continue to grow in value and never go down. No asset does that. Everything that goes up, comes down. Your home’s value may be at the highest it will ever be for a number of years to come. Now is the time to sell and think about renting until we bottom out again unless you are willing to stay in that home indefinitely.
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