The Peak Report
Real Estate Blog for the “High Country”
The Cost of Carry
Hope springs eternal……..not always. For those of you in the unfortunate position of hanging onto a piece of property which at one time was your dream home or vacation home, there are a few facts you need to consider. Your investment may not be coming back, and even if it is, it may not be coming back in an acceptable financial timeframe. The last thing anyone wants to be reminded of is the fact they may have purchased their piece of property or home during better times. You are not alone. The disruption in the housing market has effected many people at many different levels. The question is now, “What am I going to do to change course and make the best of the situation at hand. In order to do that you need to ask yourself what is the real carry on the property in question and is it greater than any realistic gains it may make over that period of time. And you need to be extremely honest with yourself. What your property may have been worth during the “Boom Market” means absolutely nothing. What your property can sell for in today’s market is the only thing that matters. I have used this expression before and I will repeat it for those that may not be familiar with it. In most cases, your first losses are your best losses. Chasing the market downward, hoping against hope that the market will change drastically for the better is a fools game at best. The following is a strategy for anyone who identifies with what I am talking about. You need to look at the following and make your decision based on those facts.
What are the true carrying costs?
- Mortgage payments
- HOA dues
Any other costs you have not figured in, special assessments, lawn and garden, snow plowing.
If you rent your property, what type of income do you realize. Now subtract that from your total carry. You now have what is called your “Cost of Carry”.
Next, contact a Realtor who would be willing to do a detailed CMA or Comparative Market Analysis. We would be happy to help you with that task if you so choose. Determine what the real appreciation number is for your specific property and make your decision based on that number. If the carry number is unacceptable, sit with your Realtor and determine the best possible approach to selling your property. Very few investors were left unscathed by the financial meltdown that transpired over the last eight years, and it is not over….not yet. Hopefully the market is moving in the right direction as the economy continues improving. And as it moves so will your Cost of Carry. Hope for the best but take precautions and prepare for anything this economy may throw at you. We live and breathe this market 24/7. Let us help you make the right decision.
“Helping you any way we can.”