One of Warren Buffet’s famous quotes goes like this: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
I am going to give you hope in this market by applying that quote to the housing market correction we are currently seeing.
For the past decade, we have seen properties in our area appreciate, and they exponentially appreciated starting in 2019. Ever since then, the question was not “Will there be a market correction?,” the question was “When will the market correction be?” To not expect a market correction is to deny all of what we know about markets in the United States. We will have dips in the graph, but when you zoom out the graph is always increasing.
I say all of that in the premise of this concept: You only lose your money if you sell that stock, or if you sell that house. Until that point, there are no realized losses. So, if we bide our time and hold onto what we have, or improve what we have, the market will always bounce back.
I realize that we all have our dream home, but this is not the market to think about your happy ever after. This is a time to, like Buffet said, “Be greedy.” I don’t mean greedy in a negative connotation. I think the term I will use is aggressive – aggressive in building equity.
So with that being said, I would like to talk about a form of house hacking.
This is purchasing a primary residence with plans of renovating/updating to either sell or hold onto an investment property. This won’t work for every home that you come across, but they are out there.
You will just have to be more aggressive in your search. Find a home that is comfortably under your budget and that you can live in for a couple of years. There has to be a way of adding value to it. If you are not comfortable with major renovations, stick with the homes that need cosmetic updating. Think about putting in new floors, paint, and updating the bathrooms and kitchen. These are some simple things that can be done to improve the value of your home.
There will be sacrifices along the way, but they are a small price to pay for the potential profit or income created. Just think about doing this every couple of years until you have 10 houses – 10 houses with someone else paying off the mortgage. Once those houses are paid off that is all cash flow, or a good chunk of capital to liquefy.
Whether we are in a bear market or bull market, deals are always out there to be found. Your approach just has to change along with the market!