Are You Movin' On Up or Bringin' Down The House?

Are you MOVIN' ON UP or BRINGIN' DOWN THE HOUSE?

In other words, are you Up-sizing or Downsizing your current real estate investments?

There are many reasons why people want to increase the number of properties they own and there are even more reasons why they want to decrease them. You have to pick what best satisfies your current life situation. As a residential property buyer, this may be your first home, or you may have outgrown your current one. Perhaps your family has grown, your income has increased, you've had a change of job/career or you just want a bigger space. If you're an investor, maybe you're beginning your investment venture or have had some success in the market and now want to expand your business. Either way, buyers of real estate often find themselves wanting to up-size as they know that the "best investment on earth is earth". And on the flip side, some home owners may find themselves in an "empty nest" syndrome, or at a change in income/career and feel they just don't need quite as much space. Or as an investor, maybe you no longer want to devote the time to all of your investments or perhaps you want to only keep the most profitable ones. Therefore, it's time to downsize. Whether you are up-sizing or downsizing, you know that you need to make a change. So how do you determine if the time is right?

Well first off, take a good look at your current living situation. You may be living in an apartment now and want to buy your first home. Or you already have a home but know you need a bigger place when the people in your household are falling over each other and getting in each other's way. One bathroom for 5 people may no longer cut it. When you look around you find you cannot easily build an addition or magically create another space. You need to up-size. But it's not always easy as you first have to look at your financial resources to determine if it's doable. I always suggest to get with a lender at various times in your life to see if making a change can actually work financially for you. Everyone's situation is different and the options can be varied. But one thing is for certain: if you really want something to happen, you can make it happen. Take the steps in order to get you, and your family, to the desired goal. Determine what kind of home you want and what is important to you. For example, how many rooms fit your family size, how large of a yard do you really need, do you want a big kitchen, how much would it cost to up-size, what are the taxes, resale value and other finances associated? If you have kids, how good is the school district, is closeness to activities important, what kind of neighborhood is it really and is the commute good for your job ? So many questions, but they need to be answered. So make yourself a list of wants vs. needs. Then get with your Realtor so they can help you determine what area best checks off most...if not all...of your boxes.

If you are new to investing or have had some success and are looking to build your portfolio then you are ready to up-size. You have studied that market, looked at the areas that cash flow, and are ready to either purchase for the first time or increase your acquisitions. Again, take a look at your financial wherewithal. Are you utilizing a BRRR strategy, a 1031 exchange or something else to expand your portfolio. Are you a buy and hold or fix and flip Investor? Are you looking for single family or multi-family rentals or something else? Evaluate properties and run calculations and then do it again and again till you are sure you are making the best decision in the market you feel will provide great returns. And just because it worked the first time in one neighborhood, many advisers suggest avoiding the temptation to buy again in the same neighborhood. Diversifying your properties might be a better choice for you. If an area takes a downturn, your properties in other areas could carry you and save you from financial ruin. But you have to understand the neighborhoods in the city in which you choose to invest. Neighborhoods, including those in my market of Pittsburgh PA, can be varied on investment returns and some properties are completely different even within the same neighborhood...sometimes even on the same street! Some neighborhood key factors to look at include median home value, median income level, percent of population employed, percent of owner-occupied properties and average school rating. Bottom line here is that you can grow successfully with proper planning. And learn to do calculations yourself as no one will care more about your money than you.

But what if you are looking to downsize instead? It's so true that life is full of changes. There are many reasons why people downsize. Not just for retirees or empty nesters, it makes sense for a lot of people. Basic things like a smaller purchase price, lower mortgage and utility bills are obvious reasons, but there a host of others. Things such as a change of job or income level, or the need to have more disposable income for other things like investments, vacations, life experiences, debt, or for just wanting to have a larger savings account. Building that emergency fund makes sense as you never know what major life event might be just around the corner. When I look at surveys, the #1 reason for downsizing is primarily due to retirement or the empty nest situation. But many more choose it to gain back a sense of freedom, especially after years of devotion to career and family. A desire from downsizing might be to do it at the right time that allows you to profit from the sale of your home. But whatever the reason you choose, just know that you want to make sure it's the right time for you to downsize. So if you are ready for that, get with a local expert that can help you with the sale of your longtime family home. A Realtor can help you understand market trends and discuss what all is involved in the selling process as well as the buying process of your new home.

So, while some of the reasons for downsizing for real estate Investors may be similar to Homeowners, some are very specific to REI. Perhaps your investments are not performing as well as they used to (diminishing returns from depreciation and tax advantages, or a wide range of other benefits that have reduced), or perhaps the neighborhoods have changed. You may want to downsize your current investments, albeit briefly, to buy in other more profitable areas. Or maybe your investments are consuming too much of your time and money. Perhaps you feel it's just time for you to downsize regardless of the specific reason. Whatever the reason you choose, make sure you are selling at the right time, for the right price and certainly for the right reasons. You already know the value of calculating a deal for purchasing. Selling properties is no different. You have to carefully calculate the sale and what tax and other financial ramifications are involved. You don't have to go it alone, however. Feel free to consult real estate professionals like Realtors, Accountants, Financial Advisors and Lawyers that can assist you with making a sound decision both personally, legally and financially.

So, what's the moral of this blog story? Periodically look at your current real estate situation and how it is affecting your life. Is it time for a change? Look are your current living and business situation and be motivated to make a change now if you think you should. If you are comfortable where you are, fantastic. If you want something different out of real estate, step out of your comfort zone but proceed carefully, cautiously and with much consideration. Whether you are choosing to up-size or downsize in your real estate endeavors you can achieve your goals in life with proper planning. You already know that real estate still provides the best returns, the greatest values and and the least risk. So, go out there and up-size or downsize if you want to. The choice is yours!