Is Now a Good Time to Sell Real Estate? It Depends.
Interest Rates (Photo credit: 401K 2012)
Many are recommending that now is the time to buy real estate due to the low interest rates and collapsed values. There is also the notion that real estate provides a hedge against potential future inflation. See chart below which depicts inflation-adjusted values of US house prices over time. It may make sense to purchase a new investment property if you can get the right price, positive cash flow and lock-in a low 30-year fixed rate. However, if you currently own an investment property that doesn't cash flow, you might consider selling now. This is particularly true if any of your mortgage debt has a variable rate. If we have a significant bout of inflation in the future (the result of current Fed "money printing" - monetary policy which is highly inflationary), you could be in a situation where you are selling into a market that is further depressed due to higher interest rates (which reduce affordability and therefore demand) while your monthly negative cash flow worsens. Selling now has the advantage of liberating you from the monthly negative cash flow and protecting you from further downside risk in the event of possible further decline in value or the effect of rising interest rates and monthly payments on variable rate debt. If you have any equity in the property, it allows you to redeploy that capital to another use - perhaps cash or gold.
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