Is it time to cash out that equity yet?

Question

Case Schiller on a 31 MONTH HIGH!?! Maybe we should be more concerned about the return OF our money rather than the return ON our money. If you aren't getting out should you think twice about getting (any further) in?

Kathy Fettke (Real Wealth Network) says in her latest podcast, "The important thing is to NEVER buy at the top of the market, unless you plan to hold it at a very, very long time." She goes on to say, "But if you buy for cashflow, not equity growth,then you have a MUCh better chance of SURVIVING any upcoming downturn."

Surviving...I'm not investing in Real Estate to only be "surviving". So, you have to ask yourself, can you be brave enough to NOT be investing right now?

Coastal investors, can you be brave enough to invest in NOT HOT cash flow areas?

High End investors...are you brave enough to buy in a D area to continue making money at the bottom of this cycle?

Are any of us brave enough to stop being so darn brave...

Meghan McCallum · Answer

So, you are saying that a website that sells houses had an article continuing to sell you the story that buying homes in rapidly appreciating markets is a good idea...That's like trusting McDonald's to give you reliable data about how good for you a big mac is for you or that kids should eat a Filet O Fish to off set the risk of eating too many vegetables presents? No?I mean, I don't want to hit the ceiling. I want to be out of the market when the ceiling hits. The influx of foreign money in NOT just in real estate. You have to look at the big picture. With the stocks as high as they are the binds shouldn't be as well supported as they are...BUT foreigners are incentivized to buy bonds and it floats it when it shouldn't. I wouldn't be surprised if America's plan was to get foreign investors to throw billions into our real estate market only to tank the world economy and the foreigners would lose the land right back into the hands of the American public. Crazy???Or brilliant!!!! Hey, how else were we supposed to pay China back....WITH THEIR OWN MONEY. (now...don't go leaking my secret government plan. That one is crazy enough that if the White House got a hold of it...they'd try it. First, they'd legalize marijuana in Illinois...then they'd tank the economy. Ugh...sometimes I just need a good laugh at end the day...

Ed S. · Answer

An old man (older than Maytag Blue Cheese -- LOL!). I have lived through many economic cycles. Rates at 20%, rates as low as 3%. Inflation at 12% a year, as low as 1.5% year. House prices as hot as a nuclear reactor, and prices so cheap some of us afraid it they would never stop falling! So the point --- cycles! Houses being bid above asking price, CAP rates under 5%, 30 year amortization to make deals cash flow! I heard a pod cast today, 60 unit complex on the market 24 hours --- 7 bids! Crazy Hot! I love Greenspan's term IRRATIONAL EXUBERANCE! We are close folks, maybe 12-18 months from correction. When everyone is yelling buy, maybe it's time to take your money and run!!!!!! I'm exiting the kitchen, it's too hot for this old man! Thoughts?????

Meghan McCallum · Answer

By the way all, posts are meant to create conversation. Not say what one does another should. The same hold true with telling someone a deal is good before you know the person. @Steve Vaughan I've never claimed to be anything like Mother Theresa. If I help people it is because I had the time. My questions for Curtis were in no way meaning to dis anyone, it is simply to get people to think.The positivity for success here is great, I contribute as much as possible. But, people need to stop and think about what just happened. We are also less than100 days into a president, like him or not, its a less than predictable situation we are in. I'm not completely liquidating my portfolio, I'm just picking off the riskier ones. If I offended anyone, my sincere apologies @Curtis Bidwell. I like analogies and and intelligent banter. I do like to rile the crowd now and again to keep people on their toes and bring out people's passions. If you look at the demographics on this site it is heavy with those wanting to get in the game and some want to come in and learn it and some want to hop in quick because sometimes a little education is dangerous. You couldn't convince me to go back and be brand new. Its hard right now. If I annoy you when I post and I'm kind or I bug you because I just dropped a little disruption on a post. I'm not everybody's person. Just a person.

Steve Vaughan · Answer

What happened to your Mother Theresa helpful and kind to all attitude, Meghan?To dismiss (and dis with the big Mac reference-that was rich) a seasoned investor like Curtis who contributed to Your thread, citing undercurrents of favorable market dynamics is arrogant and unnecessary. I have no dog in this fight. I am selling more than buying but may be wrong. I'm not screaming alerts that the sky is falling based on one (very good, granted) podcast. You've said this before and suddenly during your help all thread. Why do you care so much what others do? Will you be shrugging off any and all views that aren't also out of Chicken Little's playbook no matter who shares it? Whatever

Kate Stephens · Answer

Thanks for the interesting discussion. I'm selling some property in California and buying out of state for cash flow. I intend to purchase again in Cali when the market comes back around. No idea whether this will be the right thing but I have made good money so I feel it is the right thing for me right now. Cash flow needed so I can spend time with my daughter now while she is still young. If I wait for another market cycle she will be drinking beer and kissing boys so making changes to my investment strategy now.

Steve Vaughan · Answer

A single post or comment does not a person make. Not by a long shot (thankfully- I would've been banned long ago:) You are great for BP, Meghan. I mean that.I enjoy adding a little gravel to a good conversation, too. When we are passionate about a topic, it happens more frequently and I get that. If I didn't know Curtis (we have been colleagues a long time and he's from my neck of the woods) I wouldn't have had been riled so much I'm sure. Still would have said something, but left Mother Theresa out of it:)I will confess being glad I am not new to investing also and have said as much recently. All we can do is help a little where we can.Good discussion and thanks for replying!

Joe Splitrock · Answer

@Meghan McCallum the economic down-turn really hurt flippers and speculators the most, because they had pressure to sell. Buy and hold may have been hurt in certain markets, but for me rents kept coming, so I didn't really care about property value. Yes, I could sell today for a nice profit, but then where do I put my money? Anything else I would purchase is equally expensive. As far as brave enough to not invest, I would say brave enough to save cash and invest with caution. There is a frenzy that occurs at the top of a market and it is easy to get caught up in it. Lots of people are entering real estate. Before the last crash that it became harder to rent properties. Higher home ownership and more competition from other investors increases supply and therefore decreases demand.

Wayne Fisher · Answer

Pretty much everything is a risk including just letting your money sit in the bank. The interest rate hike will have a effect on real estate to what extent who knows. If the housing market pulls back a few % not a big deal. When it is a big deal like 2008 a 600k home is now worth 350k thats a problem. I don't think that kind of thing is going to happen again any time soon. I think the only people that would have to worry are flippers using really tight margins. looking to make 15-20k on a flip. But i think real estate is a safe bet until the next black swan event anyway.

Jay Hinrichs · Answer

@Steve Vaughan If Meghan is worried then she should cash out.. nothing wrong with that.Others play the long game it all cycles.. so nothing wrong with that as well.depends on your event horizon . timing markets is hard.beating yourself up because you sold and made a tidy profit before the top.. is folly as well. selling on the down slide well that's not great.selling at the trough well that hurts.

Dan Bryskin · Answer

@Meghan McCallum It is risky all the way around. In my area, we got at least 10% appreciation in the last 6 months. Sell right now and how much more appreciation are you missing on in the next 6-18 months? Buy right now and how close to the top of the market are you? Build right now, and will you get stuck with it? So guess what? We are still buying, we are defiantly selling and we will be building. It will all be ok somehow :) Our plan is wrap as much work as we can as quickly as we can. We are looking to increase our cash position from 10% to about 30% by fall. More, if I can substitute my cash with investors. What do you think?