Timing a Sale or Purchase of Real Estate
Many property owners ask themselves is “When is the right time to sell?” or “When do I go from leasing to owning?”
In regards to selling, there are many reasons for selling a property, some of which include:
- taking gains knowing the market is near its peak
- tax/estate reasons
- personal, family or health reasons
- choosing a different area/market
- switching to a different type of property
- acquiring something less management intensive
- leveraging proceeds into a larger or multiple properties
- cashing-out and hold for a down market
- cashing-out and spending the money during retirement years
You, or possibly your accountant, would know best time to sell. If you are just selling to play the real estate market and building wealth via appreciation/sweat equity, you need to time the market. There are historical cycles in real estate, though there is no magic formula to use for timing. Even the gurus sometimes get it wrong. Currently we are in the up-swing.
On the other hand, if you have a business and you have been leasing for many years, the question at hand is “When should I purchase a property, if at all?” Also, at what step in the business life cycle do you feel confident enough to own? Again, there’s no magic formula for this either. Many businesses differ in growth patterns, though most will grow over a few years and slowly flatten out while others will continue to grow as demand increases. Some businesses’ growth constraints are purely based on executive decisions not to continue to grow in order to maintain quality and control of their service or products. You as the business owner (or your accountant) will know when you are ready to take that next step. Many of the business owners I have worked with that purchased their property mainly did so in order to build further personal wealth by owning the real estate and leasing it back to their business. Basically, having their business build-up their personal equity. They felt comfortable enough with their business being the tenant of their personal investment. In some way, it puts them into the “driver’s seat” and the destiny of their real estate investment. Of course, having the financial wherewithal is an integral part of owning real estate. Banks prefer “owner-occupied” properties, so you have an advantage right-away. This usually means partially or wholly occupied by the buyer’s business.
The best thing to do whether buying or selling property is getting familiar with market values. Having market information is a very important piece of this decision-making process. You will feel more confident in your sale or purchase, knowing you have done your homework.
If you have a property you would like to sell or are considering a purchase, contact me and I can give you market information for your decision making process. Andy Mayr, CCIM – (301) 918-2919 or amayr@naimichael.com.