Stages of the Market

Stages of the Market

About 3.5 years ago we decided to buy a rental house for a longer term investment, in an area a couple of hours away that had an active market. By looking on line at listings we selected a Realtor and paid them a visit. We looked at 5-6 houses and picked one that seemed to have the best potential. It was a typical 1948 house, 2 BR 1 Ba, and a double garage, on a modest sized lot. The asking was $49,000, and it was a FNMA repo that had been vacant several months. We inspected the interior, and it needed new carpeting, some wall repair, and patching the floor in the utility room, along with minor electrical work.

We offered $43,000 cash and gave the requested $1,000 earnest money. We got a counter offer, but they merely wanted another $3,300 toward the earnest money. We took title in an entity's name, which meant that we couldn't get any institutional financing. So we got it with cash provided by a refinancing of another property.

Over the next several weeks, we redid the interior and painted the exterior, spending about $5,000. We advertised it for rent at $550 plus utilities and got a good tenant. All went well for over a year, when the side sewer line gave out, which cost $4,000.

When the tenant said she had physical problems and would have to move, we decided it was time to sell, as the market value had risen to about $86,000. But a new medicine helped the tenant and she didn't have to move, so we delayed selling.

Shortly after, the sub-prime lending problem hit the market, but it was slow to react. In a few months, the tenant had to move, so we put the house on the market, with good comps to support a price of $90,000. After the market decline took hold, we reduced the price, but still no valid offers.

Several months later, since we didn't have a need to sell at a price around $70,000, we decided to rent it again until the market recovers. It was promptly rented for $625 and is producing a good return again.

This situation illustrates Dean's book's Stages of the Market, and the different strategies that are recommended for each stage. We now appear to be at the bottom now, according to the Realtor's report of prices inching up and the volume of sales increasing. So we are landlords there again and will bide our time until the market returns toward a top. Of course, we could have sold at $70,000 and made a nice profit, but our economic situation didn't require it, and hope springs eternal. That's why we like investing in real estate.



I'm glad that things worked out for you with this property. Thanks for sharing with us and showing us how important market changes are to investors. It's good to know that by thinking a little differently you can adapt to any market.


Cool Elena Cool
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."

Fickle, fickle real estate markets.

That's why I'm so thankful to have Dean's book to help "read" the market.
Thanks for sharing that story, cactusbob. It really shows how an investor can ride it out without concern if they are diligent to have several exit strategies.



"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)

"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11

For a little about me, welcome to the site, and a few tips for new DG family members, click on this link:

Great Strategic Move

Bob, that was a great strategic move, not only to ensure increased profit later but also continuous cash flow in the meantime.



"You can never get to the top, if you are not willing to climb. Do not look at the difficulty of the climb, only anticipate the view from the top."
"Can't even walk without you holding my hand." (Song)
"Is anything too hard for the Lord ..." Genesis 19:14
"In all things, wait on the Lord."
"Think not of your own deliverance, but trust in God who will give in abundance."
"When you are down to nothing, God is up to something." Unknown
"Our lives begin to end, the day we become silent about those things that really matters." Dr. Martin Luther King Jr.

Syndicate content