BUY LOW/SELL HIGH: It's the foundation of any successful investment strategy, but how do you do it when the investment is your living space? By doing what successful investors have always done; run away from the herd. Buying Low in a High Market If everyone else is buying something, that's when you want to be selling it, not buying it. When everyone else is trying to sell something, that's when you're going to get the best deals as a buyer. Investors are fleeing the stock market and putting their money into houses. Should you be investing in the stock market? Probably Yes! Should you be one of the herd buying a house? NO! It's a sellers' market now. The time to buy is in the down-turn, the buyers' market. Buying during the down-turn in the real estate cycle is a surefire way to buy low and sell high. But, what if you're renting and the market is hot? Should you still wait for the slow market? NO! The $12,000 or so that you're putting into your landlord's pocket every year can turn into hundreds of thousands of dollars through compound interest if it's put into your investment portfolio instead of into rent. Buying to get out of a rental situation in a slow buyers' market is brilliant. Although it's not ideal, buying to get out of a rental in a hot sellers' market can still be a better option than waiting for the buyers' market to come back. The caveat is that you must be buying for the long-term. You have to know that you're buying at the peak of the market, that the value of your home will drop, but that it will recover eventually, hopefully by the time that you are ready to sell. Keep in mind, home values are just now getting back to the levels that they were at back in the "boom" of the late 1980's. Buying in today's hot seller's market means you'll be competing with other buyers for the same property. How do you do that and win? By following the strategy in the first paragraph above. Don't buy the house that everyone else wants to buy. Run away from the herd. Buy the one that nobody has bought and that has been on the market for 6 months. I'll share something with you that the other buyers don't know. You're not buying a house. You're buying land with a building on it. Will Rogers was right when he said "Buy land, they're not making it anymore." As Earth's human population rises, the demand for land increases. There are periods where land values drop briefly, but generally speaking land values go up, while house values go down through depreciation. For appraisal purposes, a house - the structure sitting on the land - is estimated to have a lifespan of 50 years, meaning it loses 1/50th of its value every year. An unmaintained 50 year old house has no value. When you see a listing with the words "Land value only" in the blurb, it means the structure is worthless. Consider the house that was built in the early 50's and has never been upgraded. It's galvanized plumbing will be clogged by corrosion. If it was a modern house, the copper pipes will be worn paper-thin by the minerals in the water. The fabric covered non-grounded wiring is unsafe by todays standards, the shingles absorb more rainwater than they shed, the single glazed windows whistle in the wind, and the heating system can't keep up with the cold that seeps in through the soggy insulation in the walls. The house is worthless. But, what is that 60 foot by 200 foot lot worth? TONS! What does that mean for you? The investment potential is in the older fixer-upper houses, on the large lots, that have been on the market for a long time. It's not in the newly constructed house you're considering buying from a builder. Lets say you buy a 25 year old house on a large lot, for $150,000. For argument sake, assume the lot is worth $100,000 of the value and the house is worth $50,000. Compare that to the new $150,000 builder's product, on a $50,000 lot with a $100,000 house of the same size as your older home. If land values continue to go up an average of 5% per year for 5 years, and the house depreciates 2% per year for 5 years, the older property will be worth $167,628 after 5 years, while the new one (depreciating more and appreciating less) will be worth only $153,814 .   Few buyers understand the distinction between the house and the land it's sitting on because the new home builders have done a brilliant job of marketing the houses they put on the lots. Builders and developers don't sell houses. They sell land. They put the houses on the lots so they can sell the land. They don't want you to notice the postage stamp size lot, so they merchandise the features of the house and hope buyers don't notice the land it's sitting on. Now that you're an educated buyer though, you won't be competing with those other buyers. They're looking at the houses, while you are out looking at the lots and their locations. Location, location, location. Yes it really does matter where the house is. If you buy in an undesirable area, no matter how closely you follow my advice, you cannot buy low and sell high. You'll just buy low and sell low. My buyer-clients know how desirable their new home's location will be to other buyers. I also advise them on the changes they need to make to the house in order to bring those buyers back when you're ready to sell. Once you've done your homework, and narrowed your possible properties down to the ones with big lots in good locations, with less than desirable houses, which one should you take a shot at? Your target is what we call the "motivated" seller. They're the ones who are selling a property because they HAVE to sell. You're looking for the seller who is getting worried, or even desperate. There are Realtor-code clues in the listing blurbs that help point them out. "Priced to sell" means the seller thinks the listing price is the house's market value and won't accept less. "Make an offer" means that the price is only an initial offering and that the buyer is open to selling at a lower price. I can help you read between the lines of the listings that interest you. If you're the only buyer around, you can negotiate the best deal for yourself. There's one final piece of the buy low/ sell high puzzle. It's called "sweat equity." If you don't do something with that undesirable house after you buy it, you're going to have just as much trouble selling it as the seller you bought it from. Upgrading and decorating the house will help you sell it for more, but the dollars that you put into your pocket will depend on how much of the work you can do yourself. If you're able to do the carpentry, plumbing, electrical and decorating yourself, you'll profit far more than if you're hiring tradespeople to do the work. There are a lot of buyers out there who don't have the skills to fix up a house, and who don't know they're supposed to be buying land with a building rather than your house. They will be your target market when it's time for you to sell after you buy low and renovate. You'll find advice on renovating to attract them, along with tons of other information, on my "Frequently Asked Questions" page. If you're ready to make an intelligent buy, climb on the FAST-TRACK No-Mystery Buyers program. or learn how you're going to sell later on How To Sell Higher

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