Can investors really time the real estate market , or is it wiser to just consistently invest , and hold ?
We all know that there can be fluctuations in real estate prices , even if values are constantly going up over time . So , is it possible to time the market ? If so , what does it take ? What ’ s the best way to do it ?
Why Try to Time the Market
Trying to time the market is critical in publicly traded stocks . Stocks are now believed to be 70 % or more overvalued . It can take a decade or more to recover from that , just to get back to par . There isn ’ t anything you can personally do about the stock prices . You just have to wait . Worse , there is no downside protection . If it goes too deep , there is a PR scandal or the industry changes , all capital may be lost . It is vital to sell before the market begins to dip , and buy again before it begins to go up , if you want to avoid negative returns .
Real estate is a little different . You can absolutely find greater bargains during tougher times , and sell high in bullish times . This strategy can absolutely help to maximize returns .
However , real estate is a tangible , hard asset , that will be there no matter what . It can also produce income , which doesn ’ t vary much as asset prices fluctuate . Plus , you can control the value of your real estate assets with improvements and repositioning .
Reasons Not to Try to Time the Real Estate Market
There are two main reasons that most individuals and investors shouldn ’ t try to time the property market . The first is that investors are notoriously bad at it . Most almost invariably wait too long to sell , and end up folding at the bottom of the market . Then they wait far too long to buy , and miss all the gains .
The second reason is that transaction costs can be high . Between time spent on due diligence and hard closing costs , you stand to lose a decent chunk of change if you sell and rebuy the same property in an effort to time it . Depending on where you are , and the fluctuation , this may be more of loss than if you just held , and received income from the property in the meantime .
Image by Tumisu & janjf93 from Pixabay
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