You should plan to sell in these three conditions:

1. You want to sell. Investors are constantly tempted. Resisting temptation and exercising patience¡ªin other words, following a sensible plan rather than responding to the allure of momentary greed¡ªis a difficult strategy, but it pays off. For example, if you buy stock because you believe it has long-term potential to produce profits and pay dividends, selling after a quick price run-up is contrary to the investment goal. The same holds true in real estate. 

Don't sell unless selling fits into your plan. However. when you want to sell because your goal has ripened, that should be the main indicator that it's time to do so. For example, you bought a house to fund a child's college education. A decade later, the child is ready to go off to college. That's the time to cash in your profits and fund the college education.

2. It's a seller's market. In a buyer's market, sellers have to compete with one another for a limited number of buyers; in a seller's market, the opposite is true. As a seller in such a market, you have the luxury of getting offers from a number of people who want to buy. In a very hot market, there could even be a bidding war, with offers coming in above your asked price.

If you can afford to wail out the market, the cycle will eventually come around, and a seller's market will materialize. You can afford to wait as long as you don't have to sell, and as long as you are satisfied with the tax benefits and cash flow you are getting from the properly.

3. You believe that the cycle is at or near the top. Tops of cycles are no easier to identify than are bottoms of cycles. Anyone who has played the stock market knows how deceptive indicators can be. and knows that false signals look like the real thing. The same applies to real estate. Developing cyclical indicators are only obvious in hindsight.
If your analysis tells you that the top of the cycle is at hand, and if you are ready to sell, this is probably the best point you will find at which lo sell.

You should hold onto your property and wail when the following four situations exist:

1. You are not certain whether the liming is right to sell. Uncertainly about a cycle is one symptom of being involved with any investment. Experience and knowledge about how to read indicators help, but there are no sure ways always to know what is going on. Eventually, every investor faces the decision to sell or to wait. If you are simply not ready to sell, then you should not react to cyclical indicators. We often hear that stock market analysts give out a "sell signal," meaning they are announcing that people should sell a particular stock. But how do they know what investors' goats might be? Perhaps some investors want to hold that stock as a long-term investment. Using the same argument, you should wait to sell if you are unsure about the timing, or if the time is not right given your long-term goals.

2. You would sell In the right conditions, but you are willing to wait. Many investors find themselves perpetually in the status of being willing to sell, if the right offer comes along. This describes a large percentage of real estate investors. Cycles do not always time themselves for your convenience, of course, so you often need to exercise patience and wait for conditions to bring buyers to you.

3. Cash flow is acceptable for the moment. Why sell under pressure if you do not need to? While the prospect of selling is attractive, you might do better by waiting a few months to see if conditions change in your favor. This is especially advisable if rental income is paying your mortgage for you, and you are enjoying tax benefits in the meantime.

4. You don't have any specific plans for the proceeds if and when you do sell. Some investors think they are obligated to sell whenever a profit opportunity presents itself. That is poor planning, because it means the "plan" is to react to circumstances beyond your control rather than to create circumstances that you desire. You often have several choices as a real estate investor: sell, refinance, expand. or wait and see. If you have no immediate plans for your capital, and there is no pressing need to use that money elsewhere, you might be better off to wait and take no action today.
It is a better idea for investors not to act when they are not certain, than to act. Waiting often clarifies matters, whereas acting on impulse could be costly. It would be nice if the real estate cycle would conform exactly to your plan and timetable; but it does not. While the three most important principles in real estate are location, location, and location, perhaps we should also recognize numbers four. five, and six in importance: timing, timing, and timing.

 

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