3 Things to Consider When Deciding on Renting, Buying or Selling in 2016

1/14/2016

Making a real estate decision can be an exciting yet challenging time. It brings the prospects of recognizing appreciation gains, new opportunities and potential for growth, a more convenient and desirable location, a change in scenery, or the ability to have a more functional property. However, in today’s market there are other factors that must be taken into consideration when deciding on renting, buying, or selling in 2016. Let’s briefly look at 3 considerations when evaluating this decision.

1 Why are you making a change?
2 Market Cycles
3 Availability & Choices

WHY ARE YOU MAKING A CHANGE?
Urgency, necessity, opportunity, or just for a change….? Knowing why you are considering renting, buying or selling will provide more clarity on expectations.

How does the reason for the change affect you?

Knowing the urgency of this decision will help with pricing expectations.
Necessity is sometimes out of our control and can impact urgency. Make sure to work with a real estate advisor who understands the situation but does not disclose too much to the other negotiating party.
There is great opportunity out there in the marketplace. For Buyers, interest rates are still at historic lows. For Sellers, as prices have rebounded from market lows, this could be a good time to realize that appreciation. You may want to consider selling and then renting the same building with a sale lease-back.

If you are making a move just for a change, this may not be the market for that. Moving laterally (same size space) is generally not going to provide any cost savings in this market.

Consider how urgency, necessity, opportunity, or change of scenery can affect your decision.

MARKET CYCLES: 

Where are we in this current market cycle? Despite an overall long term trend upward, real estate markets generally reach peaks and valleys approximately every 7 years. By many economists' perspective, we have been trending up since around 2009 or 2010. In either estimation, we are near a peak. Demand is high right now and availability is low.

How does the current Market Cycle affect you?

(a) If looking at selling or leasing your property in the next 12-36 months, now is a good time to do that. Determine how a 15% correction could affect the value of your property.
(b) If looking to purchase a property, you must have a long term outlook. Again, there is also the advantage of historic low interest rates which will allow you to pay down your mortgage faster.
(c) If looking to rent (tenants), consider negotiating a shorter term lease to be in a position to renegotiate at the next reset in the market.

Understanding the current Market Cycle and how that affects you in the short-term and in the long-term can be the difference in making the right choice now.

AVAILABILITY & CHOICES:
Presently, in the industrial real estate market in southern California, availability and vacancy are low, new construction is limited, and choices are few.

How does Market Availability affect you?

For starters, consider a wider geographic area target.
Secondly, renting, rather than buying, will generally provide more property options to consider.

Lastly, if renegotiating and extending your tenancy at an existing location is an option, consider that alternative and revisit the search for a new location when the market cools down and more choices become available.

Recognizing the availability in the marketplace and your options will help you to choose your next steps wisely.