When to Buy Sell and Invest in Real Estate Research Paper

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Real EstateIntroductionWhen it comes to buying, selling or investing in real estate there a few common issues that people will want to consider: these can include when to buy/sell, what kind of rate to expect, whether to use an agent to assist in the process, how to obtain a loan, how to negotiate, and how to identify an opportunity for investment. As Maher (2018) points out, real estate is an imperfect market that is hyper-local in terms of how it must be approached. In other words what is happening in the real estate market in one part of the country is not necessarily going to be the same thing happening in another part of the country. There is a great deal of nuance when it comes to buying, selling and investing in real estate that must be understood so as to navigate the complexities of the market. In a seller’s market, for example, real estate tends to move quickly with many buyers competing with one another for the same properties. House flippers also tend to be more active in a seller’s market as the demand for real estate outstrips risks of upfront expenditure. For anyone interested in real estate, this paper will provide some assistance in showing how to address these common challenges by giving solutions that will make the process easier and most effective. It will show that instead of jumping onto a momentum train, one should proceed with caution and do due diligence in understanding the specifics of the market and where it is likely to be heading in the coming years.Statement of ProblemMany first-time buyers, sellers and investors make the mistake of assuming that anytime is a good time to buy, sell or invest. They see others getting into hot markets and want to take advantage of what seems to be a good opportunity on the surface of things. They may be told that interest rates are low, so now is the time to buy—or they may invest on the fear of missing out. Or they may refrain from selling a property because its current market value is below what they paid for the house initially. In each case, the individual is acting on a limited supply of information and basing a major decision on a narrow set of data. There are actually better ways to proceed when it comes to making a decision on real estate.The problem stems from the fact that most first-timers tend to rely on simple media-driven narratives about real estate. These can include articles that appear online, news reports on TV, what they hear on the radio, or even what they hear from peers. As Bandura (2018) points out, most individuals’ cognitive processes are informed by peers, groups and media primarily. But this is a very superficial way to go about making buying, selling and investing decisions.First of all, as Wheaton (1999) points out, most different types of real estate have very unique cyclic properties.

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The office real estate boom of the 1980s was myopic in nature and caused by a surge in demand that was not sustainable. It did not take into consideration the coming of the tech revolution and the shift to ecommerce and virtual workplaces. Today, empty retail outlets and offices sit across the nation, and cities like New York feel like ghost towns with boarded up windows where a once thriving economic center once existed. The point is that just because momentum is there does not make acting on that momentum a wise decision. Yet if one had been looking to buy commercial real estate in the 1980s…

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…seek to sell these assets and purchase bonds at reduced prices so as to lock in higher yields (Choe & Vega, 2021). What is happening in one market thus has an impact on other markets, including real estate, and one has to understand how this relationship works.FeasibilityThe proof of the feasibility of this solution is not hard to come by; one need only ask any successful real estate investor (Greene, 2018). Knowledge of the market is the key characteristic that all real estate investors have in common; this includes the ability to analyze a property’s cash flow, understanding maintenance and rehab costs, the ability to identify property that is under-valued, and most importantly the ability to be patient. Many of the most successful investors are contrarian, meaning they sell when everyone is buying (and prices are usually peaking) and buy when everyone is selling (and prices are usually bottoming) (Greene, 2018). The proof of this trade is in the pudding, as the saying goes—many successful real estate investors all tell the same stories: what they use is patience, data, and understanding of the cyclical nature of markets.ConclusionEvery market is different and markets are always changing. One of the things that drives a market is interest rates. When rates are low, borrowers have more incentive to take out home loans, which means there is more interest in buying a home—either for living purposes or for investment purposes. Investors will add to a portfolio of real estate believing that they can satisfy the interest on the loan they take out by renting the property or putting it on AirBnB. However, rates tend to rise and fall just like other markets. To navigate the world of real estate, it is imperative that be able to understand these cycles to their advantage rather than act….....

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