Real Estate Investing Profits

Why You Should Not Sell Your Old Home

There’s no question the current environment of the Tri-Cities real estate market is a full-on seller’s market.  Homes sell almost just as fast as they are listed.  This is a good thing if you’re a seller, but not so good if you’re a buyer.  If you’re a “move-up” buyer, meaning you’re upgrading from a smaller and/or older home to a bigger and/or newer one, you’re going to experience the benefits of the seller’s market on one end and the hardships of the buyer’s market on the other.  But what if I were to tell you that selling your existing home was a bad idea?

Only Sell if You Have To

Not every person can get away with it, but if you are able to hold on to your existing home, thisi sia great time to do so.  Not only is it a seller’s market, but with the growth demand in the Tri-Cities of Richland, Pasco, and Kennewick, it’s also an INVESTOR’s Market.  Demand for rental properties is very high right now, and with the anticipated growth in the area, it’s only going to get higher.  So owning and accumulating investment (rental) properties is a great wealth building tool… if you can afford it.

Check with your Mortgage Lender First

Sometimes, a buyer can only qualify for a home loan if they sell their existing home first.  If that’s the case, you may have few options, but if you can keep the home and still qualify for a second home loan, you may be able to cross the bridge from being just a homeowner to being a real estate investor.

Don’t Always Take your REALTOR’s Advice

As a licensed REALTOR myself, I can say this without bias.  Many REALTORS are going to want you to sell your existing home so they can make a commission on that sale.  They’re also going to be hopeful to help you find and buy your next home so they can make a commission on that deal too.  As a REALTOR and a Property Manager, this is one of the major disagreements I have with other REALTORS.  Most homeowner’s don’t fully understand the concept of the REALTOR’s “Fiduciary Responsibility” to you.  A Fiduciary Responsibility means that they MUST (not “should”, or “ought to”, but MUST) put your financial interests first.  If you bring up the idea of trying to keep your existing home as a rental property and your REALTOR immediately tries to talk you out of it, FIND YOURSELF A NEW REALTOR.

Fiduciary Duty

As mentioned previously, your REALTOR has a literal obligation to put your financial interests first.  Earning their commission is a far second (maybe even third or fourth) to this duty that the REALTOR has taken an OATH to uphold.  Acting as your Fiduciary, if there is a chance for you to keep your existing home, profit further from increasing home values by operating it as a rental, and buying your move-up home without having to sell the first home, a trustworthy REALTOR is going to confirm this.  Unfortunately, greed is a powerful tool, and agreeing for you to NOT sell your existing home may be contrary to your REALTOR’s profit motives.  Again, if this is the case, do not hesitate to find a new REALTOR immediately.

Real Estate Wealth Building

While it may be possible to earn a small profit from one home to the next, there is no question that the single best wealth building tool on the planet is by acquiring a diverse and substantial real estate portfolio; this includes land, rental properties, and your own home.  With this being said, there is one thing for sure.  You’ll never build wealth with real estate until you start holding on to what you’ve got and gradually adding to it, increasing your portfolio as your financial abilities permit. If you’re able to purchase one new rental property every 5 years, and reap the benefit of having renters pay the mortgages for these properties, you could easily have more than a million dollars worth of real estate holdings in ten to twenty years.

Stocks are NOT for Guaranteed Wealth Building

Many people get sidetracked thinking the Stock Market is where they’re going to get rich.  While this is “possible”, it’s very unlikely, unless you are extremely smart and don’t mind losing money along the way.  The problem with stocks is that they are too diverse and anything can happen.  Using one company as an example, if you buy stock in Coca-Cola, for years your stock earned a profit.  No one ever thought Coca-Cola was a losing bet.  The problem was (and is) (1) stock in notably strong companies are too expensive to purchase enough stock to really earn money, and (2) even companies thought previously immune to losses eventually lose money.  Just like the Titanic, everything is sinkable.  With the recent surge in alternative beverages, Coca-Cola stock has actually lost value steadily over recent years.  Oil is another good example.  I’ve known people who worked in the oil industry and made millions (on paper) from their oil stocks.  However, with what we’ve seen happening in the oil markets lately, not only have many people lost their fortunes in oil stocks, some oil companies have gone out of business altogether.  This is another problem I have with stocks.  Years ago, I thought for sure I was going to make money on a new emerging technology, satellite radio.  Between the two competitors, Sirius Satellite Radio and XM, I did my research and went with Sirius.  Two years later, Sirius had lost more than two thirds of its value and was ultimately acquired by XM.  Fortunately for me I only invested $1500.00, but I still lost every penny of it.

Homes Do Not Go Out of Business

Whether investors will admit it or not, just about every stock in existence is connected, one way or another, to the housing market.  Real estate is sort of a “genesis investment” for everything else.  When homes lose value, as we saw in the recent Great Recession, not only did millions of people lose their homes, but businesses closed, jobs were lost, stock portfolios plummeted in value, and entire industries (home construction, remodeling, car sales, etc) dried up and suffered tremendously.  So when the housing market is strong, other industries and stocks are strong.  But when real estate drops, many businesses shut down and close.  Fortunately, despite an up or down market, your home doesn’t go out of business.  It may lose value, but it will eventually earn it back.  And who really cares about real estate values until it comes time to sell anyway.  As long as you’ve got a renter in the home paying the mortgage, values can fluctuate as much as they want, but in the end you’re going to still have a winning investment.

Consider Your Options First

As I said before, and will say many more times to come, real estate is the single best wealth building tool in existence.  Before you sell your current home, talk to your REALTOR about it.  If you get the suspicion your REALTOR is only focusing on reasons to sell and not discussing your long term profit potential, give me a call.  I don’t care if you hire me or not, but one thing’s for sure.  I won’t violate my fiduciary duty to advise you of the best path for you to take.  If I can help you build wealth through the accumulation of Real Estate assets, I’d take that route any day over earning a one-time sales commission.

For more information about investing in Real Estate, contact us at Management 1 Tri-Cities Realty & Property Management any time.  I look forward to advising you honestly and truthfully.  My clients’ trust is my number one priority.  Earning a paycheck is nice, but by keeping my priorities straight and helping my clients accomplish their goals first, mine will eventually come around.  It’s all just a simple matter of priority.

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