Its a great question…but one that most Realtors will answer with, “You betchya!”

Allow me to give you the real answer…

One really, really important thing to keep in mind as you search for homes is that when you are buying a home there are no fees involved….there is the cost of getting the loan and the due diligence fees (ie. inspections, etc), and of course the down payment, but that’s about it. When you are selling a home, on the other hand, it costs roughly 7-8% in fees.

You have to keep in mind the “Cost of Sales” when you are thinking through whether or not you will be able to sell it for a profit in the future. So the important thing to keep in mind is that for ANY home you buy, in order to sell it and at least break even, you will need that home to rise in value by 7-8%. It will take several years for appreciation of 7-8% to occur…no matter what area you are looking at. I would GUESS at least 5-7 years…maybe more. I stress “guess” because nobody really knows….we all thought we knew, but we were all proven wrong as evidenced by the housing meltdown we had over the past few years.

A lot of people didn’t understand this back in 2004-2008, and that is one reason that we had such a housing mess across our nation.

So, ultimately what I’m getting at is this…its really, really important to buy a house FIRST because you love it and want to live there (whether it is your “dream home” or not) and think its a great place to live…for you. Secondary, and only secondary, should be the idea of “making money”.

The days of making huge gains in real estate are only achieved in 3 ways in the present economy (ie. “post 2010”): 1) doing major remodel like gutting, popping the top, adding on an addition, etc. 2) being a cash investor and buying aggressively 3) waiting a long time. Outside of those 3 ways, I would advise you to not expect to “make money” in real estate….otherwise I’m painting an unrealistic picture for you which may or may not happen. In general, the days of making money in real estate simply by virtue of living there a few years are over. Will that come back? Maybe. But in the meantime, buy a home that you want to live in, not that you want to make money on. There’s always an exception to this idea…it seems like everyone has their story about how their sister’s fiance’s uncle’s kid bought a home for $300,000 and then sold it a year later for $400,000 without doing anything to it….funny, I’ve heard those stories too but I’ve never actually met anyone who did it in today’s economy.

Asking questions about “getting out” of a house at a profit is a good process to go through…however, just know that the answers are highly speculative. In other words, when it comes to sell, nobody
knows what the market dynamics will be, what the economy will be like, what rates will be, what unemployment will be and what homes will (or won’t) be selling for….all of which have an enormous impact on your ability to “get out” at a profit.

That is why I stress to my clients to buy homes that they really do want to live in…and if they make money when they sell, then great, but that should not be the driving factor in the decision making process, rather an unplanned, unanticipated benefit….in other words, don’t count on it. Hope that helps – shoot me an email at dave@ThriveDenver.com and let me know if you agree, disagree, or think I’m nuts 🙂