How to Profit from a Property Downturn
For most people, a house is the most expensive purchase they will make in their lifetime and many who purchased in the last two years have found that the resale value of their home is less than what they paid for it. Nobody likes to lose money on something they have paid a lot of money for and for this reason, sales have dwindled. For all but a few people, however, holding on to your house in a downturn for fear of making a loss does not make sense. In particular, anybody who is selling to transfer to another town or selling to buy a bigger house can use the downturn to advantage. Take, for example, John and Mary who bought a three bedroom house two years ago for $300,000. Their family is expanding and they would like to buy a four bedroom house with two bathrooms. Based on recent sales in their street, they feel their house is worth about 20% less than what they paid for it, that is about $240,000. John is reluctant to sell the house at a loss of $60,000 however Mary, who is adamant that the family needs a bigger house, has a look at what is available. She finds the perfect house. Two years ago, the vendors Tim and Susan had purchased the house for $500,000 but now, because they are moving out of the area, they are selling for $400,000; 20% less than what they paid. Tim and Susan are not concerned about selling so low because they know they can buy a similar house for around the same price. John and Mary are delighted to find that although they might lose $60,000 on their existing house, they will save $100,000 on their new house. That’s how to profit from a downturn.