Need wise advice in a Seller's Market...

[Shawn Lovelidge]

I'm new to this site so forgive me if I ask a stupid question.

Goal:

Take advantage of Seller's market and position myself for passive income as I reach retirement.

Situation: 

• Debt: 100K; Value: 180-190K; Interest Rate: 4.25%
• Proceeds from sell: 65-70K

Scenario:

(1) Sell & Buy: I could take the proceeds, build up my cash flow, and then buy two house (one to live and other investment property). Take advantage of interest rates.

Problem:

(a) initially will loose money on investment property even with 40K down

(b) be a landlord

(c) interest rates will rise

(2) Sell & Wait: I could take the proceeds, build up my cash flow, and wait until a buyer's market.

Problem: 

(a) don't know when a buyer's market will emerge 

(b) have to live somewhere 

(c) interest rates will rise.

(3) Lease & Wait: I could rent my current house out at 1,700.00. I've never been a landlord but I was going to use a property management. Net 200.00-220.00 month [1480.00 (escrow and taxes, insurance, and property management, repairs). 

Problem: 

(a) don't know when a buyer's market will emerge 

(b) have to live somewhere 

(c) interest rates will rise.

(d) be a landlord

(4) Remain & Wait: I could stay in my house and wait until a buyer's market and save capital.

Problem:

(a) don't know when a buyer's market will emerge

(b) may not net the same proceeds from selling my house

(c) interest rates will rise.

I really don't know which way to go and I lack knowledge and experience of the pulse of the market place.

Any advise would be greatly appreciated!

Regards,

Shawn

[Robert Leonard]

@Shawn Lovelidge I think those are great questions, certainly not stupid.  When you apply the right strategies, it's always a good time to buy!  Buyers' market and Sellers' market really apply to retail participants in the market.  As an investor, you make your money when you buy - so it's always a buyers' market for investors.

What does that mean to make your money when you buy?  It means, you only buy a property when you can buy it for below fair market value.  How is that possible?  Usually it is when the property is a distressed property.  Distress comes in two major forms - the owner's personal finances or the property condition.  There are a long list of personal finance situations that cause a person to sell real estate below market value for fast cash.  There are also a long list of property conditions that cause a property to sell at an undervalued price as well.  Those are the things you have to learn to know where to find value. 

Buying at or near retail prices and hoping to make a profit is a strategy some follow, but you take unnecessary market risk when you do so.  If you don't want to learn all of what it takes to know how to acquire properties at the best prices, you could consider turnkey investing.  You would then be paying a premium for the service of someone else doing the hard part of the work and paying closer to retail prices.  If you go that rout, take some time to do your homework to have confidence in your turnkey provider.  There are more and more companies moving into this niche, so be sure you are dealing with a solid company.

To answer your questions as you numbered them, I would eliminate all of your scenarios that include waiting (2-4). Waiting will only mean missed opportunities while trying to time the market, which is pretty difficult without a crystal ball. Scenario 1 makes sense, but I disagree with your "problems." If you buy two properties that your DP will be enough to avoid PMI and maintain a cash reserve of about 20% of your cash available (can be supported by credit available), you should easily have positive cash flow. Being a landlord following some professional systems, is an opportunity for great ROI, hardly a problem. Interest rates are likely to rise, but the sooner you make your purchases, the less likely it will impact you negatively.