Should you Buy, Sell, or Hold Real Estate?

Real estate is one of the most common assets owned by your average Joe. In hot markets like these, it begs the question—should you buy, sell, or hold your real estate? Before I dive into this question, I want to clear one thing up quickly. Many real estate agents will tell you that your house is likely the ‘largest investment’ you’ll ever make, but a house is not always an ‘investment’! Investments are acquired with the intent that they will give you a positive return on your money. Ask any homeowner—most houses suck cash instead of the other way around. KNOW YOUR PURPOSEBefore you can know what to do with your real estate, you must first identify its primary purpose—investment or personal dwelling. Once you know which one it is, you should be able to clarify what you should do. Here are some examples of how your decision might change based on its purpose:If you purchased real estate with the intent to earn money on it and the market goes up, it might be a good time to sell.If you purchased a property as a cash-flowing investment, you might not want to consider selling it no matter how hot the market is unless you can replace the asset with another one with better cash flows.If you purchased a house to live in (and it is your long-term home), you might not want to sell it regardless of what the market is doing.If you purchased a house to live in (and it is your short-term house or nothing you’re seriously attached to), you might want to consider selling it, but only if you can find a better property for a similar cost.If you have cash and you’re looking for something that provides you with a cash return, you should look at hypothetical rental properties and calculate the approximate return on your money if you were to purchase. In hot markets, your ROI might be less than 5%. KNOW YOUR NEEDSIf you’ve decided to buy/sell after determining the purpose, then you need to sit down (BEFORE YOU LOOK AT ANY PROPERTIES!) to determine what your ideal property looks like.How close is it to a grocery store?Do you care if there are HOA restrictions?Does it need to be close to your work? Or a school? Once you’ve painted a good picture, rank each item by its importance—high, medium, or low. Once you’ve done this, then you’re ready to look at real estate. If any property doesn’t meet any of the high-priority items, then it is a no-go property, and you should move on. Don’t try to justify the purchase—just move on! GET A REAL ESTATE PROFESSIONALI do recommend getting a real estate agent to help you with your transaction (for now). A knowledgeable agent will make a transaction simple and easy—they will make your transaction run smoothly. However, not all real estate professionals are cut from the same cloth, so do your homework before signing a representation contract. FINAL THOUGHTSThere are so many reasons why you should buy, sell, or hold. One of the tools that can help you decide what to do is a financial plan. If you haven’t sat down with a financial advisor to get a plan put together, I recommend doing it. Again, similar to a real estate agent, choose a knowledgeable advisor who is familiar with real estate before signing a contract.