What's A Good Time To Buy Or Sell?
Are you thinking of buying or selling a house but aren’t sure if it’s the right time? In this video, I’m going to talk to you about timing the market so you know when to buy and when to sell. I’ll explain everything from active fund managers to market corrections so you can confidently make your next move.
Timing The Market
In 2019, CNBC wrote a very interesting article. In it, they said that active fund managers are actually outperformed by the S&P index for 9 years in a row at that point. But what does that mean to you? And why is this important?
Active fund managers are living day to day eating, breathing, sleeping, and tasting the market. They’re listening to every analyst on investor calls, finding out what companies are doing, learning what innovations are coming out, and picking the stocks based on that. However, if you put your money in one of those particular funds versus just putting it in the market in general, you're actually going to make less money.
You’ll make more money by putting it in the market in general—which means that even professionals at the deepest of degrees don't know how to time the market better than the market itself. But how does that translate to the housing market and your decision to buy or sell right now?
If you're buying purely on speculation, you might have to think about it a little bit more. But if you're buying because it's somewhere you're going to live or somewhere you’re going to make an investment in and rent, you have to look at the dynamics of the market as a whole.
If you're investing in something, is the rental income enough to offset what your investment is? Are you getting a good cash on cash return, a good cap rate, or a good return on investment (ROI)? Those are the elements that you need to look at.
When deciding if you should buy for yourself, you need to look at the comparative mortgage rates and the ultimate mortgage payment versus what the rent of an equivalent property would cost. This is because, when it comes to paying rent, you are paying a mortgage—just not yours. Would you rather be adding equity to a landlord and putting money in their pocket, or would you rather do it for yourself?
Now you might say, ‘But what if the market crashes?’ Let's use that as an example. Say you spend $400,000 to buy a beautiful home, and there's a market correction or even a crash (which based on some of my last videos, you'll understand why I don't believe a crash is coming). However, if there is a market correction, and it's a 15% correction, the house goes down by $60,000. You might say, ‘I wish I was with a landlord paying that rent.’ That way, they could take the $60,000 loss.
But is it actually a loss? Or is it just on paper? Think about when you are planning on selling that house. If you're planning on staying in that house for 3 years, 5 years, or 10 years, the dynamics of that loss are going to be a lot different at that point than they are right in now when you're down $60,000.
The other thing you might be saying is, ‘But what if I had to sell?’ If you ever have to sell, such as a need to move or relocating for work, you may find that you can rent that house. Market rents are more than enough to cover your mortgage payment. You’ll then have somebody paying your mortgage because that’s exactly what rent is. You can use that rent money, pay your mortgage off, and eventually sell it if you want. Or, you can continue to cash flow the property.
Let's think about this. Would you be willing to have a stock like Amazon, Tesla, Microsoft, or Facebook that went down from time to time if you knew, in the end, you were going to cash for a lot more money than you started with? My answer is yes. So that's what you have to look at when it comes to the market.
Weighing All The Factors
Do you hear your friends talking about how they timed it perfectly? Well, I'm in Vegas, and I hear that a lot from gamblers. All my friends seem to win, and they never talk about losing. But if you've looked at those properties on the SERP, you certainly know they were not built on winners.
As you can see from my many examples, timing the market is typically not going to be in your favor. If you're truly interested in buying a home, look at the dynamics of what your position is right now, why you want the home, what your needs are, and how it's going to affect, impact, and change the lives of you and your loved ones.
As the famous Bernard Baruch says, “Only liars manage to be out during all the bad times and in during all the good times.” If you have any more questions, make sure to contact me and I’ll be happy to connect with you. Don’t forget to also subscribe to my channel so you never miss an episode, where we talk about real estate, lifestyle, restaurants, and local businesses. Stay tuned to see what I feature next!