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Downsizing for Dollars in Real Estate, Why having a Plan is Worth More than Trying to Time the Market!
Episode 320th December 2021 • Billion Dollar Blind Spots • Sean T Shallis
00:00:00 00:09:42

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Hey there. Welcome back to Billion dollar blind spots, where we help people capitalize and recognize the billion dollar blind spots in their life and their business to this episode is actually, we're recording this in December. I had a great conversation with a guy this morning, believe it or not in the hot tub about downsizing from his house. He's in his sixties, his wife is in her fifties. And you know, they're talking about finally getting kids outs the house and downsizing and what is the plan? And I said, you know, it depends on the timing. It depends on what you're trying to accomplish. And he said, well, what do you mean? I said, you know, go to real estate when you're downsizing, you got to kind look at what's going on. If you're trying to time the market, you got to look at it from a standpoint of what cycle are we in, in the market.

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And where's it going when you look at a cash out. So for him, he has a four bedroom, two bath, and he go lives in, you know, in a, in a local town by me, you know, his kids are out and it's just him and his wife. So half of the house, they don't even see it most of the year, unless those kids come over for the holiday. So at this point, he's thinking, okay, if I downsize outs this house, I still wanna stay in the area. Cuz my wife still has a few years of working up here. Maybe we can get something smaller and take our chips off the table. He says, you know, Sean, what's the big deal. If we do it now or we do it five years from now or 10 years from. And I said, well, you know, ironically enough, real estate goes in cycles.

So those cycles are usually eight to 10 year cycles. So what are we looking at right now in December the 20th of 2021? So we're in the process of going COVID 19, we're going into another cycle. COVID 19, but we still have the likelihood of, you know, and going into the first January, things are gonna come a little bit. We're gonna go back to some sense of so, so and normalcy, we also heard that the federal chairman mentioned that they're looking to do three interest rates over the next over the next year in 2022, every time interest rates go up, prices go down. So you got to kind of look at those things and say, all right, first of all, what do I need to know? I need to know what my properties were today and today's market. Then what you need to do is lined out what your property is estimated to be worth over the next three years, five years, 10 years, depending on when you're looking at, when you're looking to cash in your chips, why do I say a 10 year cycle?

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Reason being is real estate goes in about a 10 year cycle. So if it's going up now and it starts to go down, it's gonna go down for about 10 years before it comes back again to where we are now or lower or higher. So how do we know when that's gonna happen? Well, here's a good, here's a good analogy for you. Two. You guys have heard me say this before 2008, we had 2 million people outta work with financial and real estate debacle. Most of those people went back to work. Most of those people were inspired to purchase homes by the government. But at the end of the day, during that period of time, we had, we had over 800,000 properties that were in some court, some sort of a distressed property situ somebody that I either was late on their mortgage or didn't pay their mortgage at all.

And they were in what they called the shadow inventory. The shadow inventory is distressed properties that we're not aware of because there is federal memorandums in courts that limit financial institutions from putting foreclosure actions on people that are late on their payments or in a financial distress situation. So when those got lifted in, in eight, 2008, early 2009, we actually saw that 800,000 properties come into a market, which was already depressed by 40 to 50% in sales and volume and went down an additional eight to 10% as a result of introducing almost 10% of the annual amount of sales into a market in less than 90 days. That's right. When you introduce 800,000 properties into a market that only absorbs 6 million properties a year, you got, it has to go somewhere. It's like trying to take, it's trying to, trying to put 10 pounds of poop in a five pound bag.

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It's gotta go somewhere. And the problem is when you do that, it actually deflates the value on and reduces the values of the properties. Okay. On. So in during 2008 and nine, the properties went down, you know, how long does it take for him to come back? Anywhere between seven to 10 years is about. And I usually say eight to 10 years is, is normal. Before we see when go from flat to flat, if you will, or top to top. So if we fast forward now, 2021, like this gentleman was saying to me this morning, he says, you know, my wife's still got 10 years to go. I said, you know, you may be better off just sitting on a house for now, or there's a couple other strategies that you can do. And he said, well, what do you mean by that? Sean? The reality is going into 2022.

There's a good chance. We're gonna see properties go down anywhere from five to 10% from where they are now. We're at all time highs based on just as a result of the COVID. We've had 15 buyers for every one house that comes into the market. And now that's starting to stabilize. We're actually starting to see properties, not sell. We're starting to see properties get reduced in price. We're seeing people negotiate home inspections where they didn't negotiate before they would just ignore it. So when we start seeing those signs, that's like seeing the storm coming across the ocean long before it hits the beach, you know, in New Jersey, we always joke about it. You know, the tourist actually stay on the beach long after the storm is already almost on time. Hoping them in the beach. When you see the, when you see there's a storm coming and you see the locals getting up and leaving the beach in herds, we people like all the tourists look around and go wonder what they're doing.

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What the, what the locals see is they see the storm coming across the ocean miles away, you know, real estate professionals can see the storm coming. So how do you prepare yourself? You know, I, I just wanna finish that concept of know in 2008, we had 2 million people out of work, 2 million people out of work in 2020 19, 2020, we had 20 million people out of work. And we were also paying people to stay home. We were paying them more to stay home than to go to work. So those people figured, you know what? I'm already distressed on my property. I already can't pay them worries, but I'm gonna stay home anyway because the government is paying me to stay home. So guess what? Early 2022, we're gonna see where the government's gonna pull back. The memorandums that are limiting people, limiting the financial institutions from foreclosing on those people.

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Once they start to take lift those memorandums, you're gonna see anywhere between 1.5 and 2 million properties that are gonna be distressed properties. So if you're planning on downsizing and you're planning on moving down, the know let's buy a down the shore or something, here's a strategy you might consider is getting an equity line of credit on your house. Now because it's at an all time high waiting in six months to a year to find the perfect home, to downsize to that one or two bedroom condo or whatever you want in this area and buying it now and renting it for as much as you're carrying it. Cuz if you're gonna, you're able to buy it cash in some cases, or you're able to buy what a substantial down payment. In most cases it's gonna pay for itself just from the rental value of that property.

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And while that property, while you're waiting for your property to, to make the decision to move over the next eight to 10 years, your property may go down in value. But over the next eight to 10 years is probably gonna come back up with the normal cycle of the market. And what's interesting is when the market comes back up, you're also gonna be able to collect. You're gonna be able, gonna be able to collect the income from that property. And when you finally do downsize, you have some place to go and you can make a decision very quickly and very easily. And you could become a, you know, what they, what they would call a, you know, highly motivated cell or when somebody makes you a good offer, you can actually just pull the trigger and say, you know what? I have a place to go to.

Another thing is you want to know is you want have somebody like myself or somebody on our website. We offer a tracking system where you could actually put your property in there and we'll send you an update of what your property is worth every six months, every year, every three days, every five days, every 10 days, whatever cycle you want to know, or our system will automatically send you a price, an evaluation of your home and an estimated value of the home. Now is that exact? No, it's an algorithm. It's a computer that generates that report, but it's gonna get you close and it's at least gonna keep your finger on the pulse of the market. If you actually align yourself with a couple of people, which is gonna be one, you're gonna align yourself with a good finance planner that can help you to look at all the numbers as a whole.

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The next thing you're gonna do is you're gonna look at finding, you know, your, your tax accountant, who may be the one in the same may not be. The other thing you're gonna look at for is you're gonna be looking for a real estate broker that, or, or find or real estate strategist like myself. That's gonna be able to give you the information to keep your finger on the market and your pulse of the market. So you'll though, if the market is gonna take a severe downturn, you may wanna sell before you may wanna cash in your chips. At the end of the day, timing, the market is probably dangerous, but the reality is you can prepare yourself and get a staff of people to help you. It takes a village, right? You've heard that. So in, in, when you're thinking about downsizing, who's the first person you talk to your financial planner, the financial planner is gonna say to you, Hey, let's look and see what your, your portfolio is worth in your portfolios, your house.

And they're gonna say, well, you know, let's go find out what your house is worth. They may even ask you what your car is worth. They may ask you what your jewelry is worth. They may ask you what, you know, if you have a, if you have a classic car collection, they may say to, Hey, what is the collection worth in today's market? And do we think it's gonna go up or do we think it's gonna go down? Are you gonna take those at a great with you? Are you gonna give 'em to your kids? Or are you gonna put 'em in some kind of a state you may also want to talk to, if you have income of over five, 10 million, 20 million in your family estate, between your stocks, your house and everything you may want to consider con talking to and estate planner, who can actually figure out if you should have a living trust or some kind of you know, a survivorship of what happens to the money when you pass.

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I know it's a more big kind of conversation to talk about. What's gonna happen in the inevitable, the inevitable or death and taxes. You're gonna have to pay taxes and you're most likely gonna die. So in the event that that does happen, what does it look like for your you and your family and your kids? So again, let's do a little recap. If you're thinking of selling your house and downsizing. If you're looking to do it in the next one to three years, one to five years, you probably wanna do it now because you're probably gonna get more for your house now than you will in, let's say in 2000 and 2031, if you're thinking of doing anywhere between eight to 12 years from now, you might wanna wait. You may wanna wait out the market, be you're gonna have to live somewhere for that period of time. You're already

Comfortable. It'll give you time to actually get your house ready for sale. You'll also know when the market is coming. You'll have a good heads up on when to do it. It'll also give you time to plan your next step. So it's really hard. When we help people sell their house and they have no place to go, but if you have some place to go and you have a plan in place to get you to the next jump, it's always better to plan things out. We look see you on the other side. Hopefully this helps you to make that decision of if I'm gonna buy, if I'm gonna sell now or sell later. And by the way, buying something now is not a bad idea either. I would just wait until after the first of the year for you to buy something, especially if it's gonna be your vacation home or your retirement home, if you need help, what us just paying us on our website, or you can just check me out. My name is Sean sch. I'm the host and I look forward to union inside billion, blind spots, where we help people discover and capitalize on the blind spots in their life and their business. Sean Sal, your friend, your neighbor, your real estate expert. Talk to you soon.



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