Real State: Buy or sell?
NEW YORK (MONEY Magazine)
"Rory Moore, a semi retired and a self-described "dabbler" in real estate, bought his neighbor's house last May for $499,000. Make a few fixes, he figured, and flip it a couple of months later for a six-figure profit.
But then the property, listed at $699,000 in July, failed to attract even one buyer in the first 30 days.
By December, Moore had dropped his asking price twice, to $565,000"
It is a real case happend in Los Banos, and because he didnt notice the real estate market is changing, he made a wrong choice.
So what happened to Real Estate??
According to the data from Ben Engebreth's Housing Tracker website, it shows that the asking price of real estate has fallen 5% in 49 cities of United State. But meanwhile, the supply of houses is still increasing.
Many people noticed that operating real estate was a profitable job and could bring them benefit quickly in the past few years,;therefore, they involved, but it turned out to be wrong. On the other hand, it makes real estate to becoming a buyer's market.
Let's turn around to Rory Moore's case. He spend $499,000 to buy the house and fixed it. According to his asking price on December,which is $565,000, we can probably predict that his total cost is around $550,000.
Do we have other choices to make this deal better?
Yes. As we all know, we need advertisement to drawn buyers. If we rent the house to a renter, they will also fix the house. At the same time, Rory Moore will have time do the advertisement. Imagize that he can get $2000 for every month, 19 months later( when he gave the asking price for $565,000), he would have $38,000 from renting the house and also get free fixed. Furthermore, he can use his profit to do the advertisement and maybe get a buyer. Calculate that way, we can get a total cost of $499,000-38,000+advertising cost, which is less than $500,000!! He can save at least $50,000.
Under the changing market, people have to consider their cost and benefit carefully so that they can make right decisions. Real Estate, was a profitable area, but after the majority of Americans noticed that, it is not a job to make every person better off any more.
Except Real Estate, do you have other examples to illustrate the changing world? Or for Rory Moore's case, do you have any other ideas to solve the problem??
Thursday, February 02, 2006