August 16 - Real Estate

             Today in class we discussed how the typical American buys stock or real estate when they are at the highest prices or when the market is doing well.  I can understand why because say the real estate market is high, a house you’re interested in might cost $500,000.  Ten years later, when the market has gone down, the house might cost around $200,000.  Now you don’t want to buy the house because you think the low price equals a bad house.  Mr. Hallam has really enlightened us on how much of a profit we can make by buying the house for $200,000, renting it out and paying off your mortgage, then selling the house when the market goes back up and it once again costs $500,000.  That is at least a $300,000 profit. 

            I talked to my dad about his experience with the housing market.  When we left Maine in 2009, the housing market wasn’t bad but it was dropping.  My dad didn’t want to hold onto the house because of the falling market.  He said that he considered renting it, but decided against it for a few reasons.  One, that it is hard to rent out a house while living in a different country because you can’t check up on the renters and see how they’re taking care of the property.  Property managers can be used to make sure the renters are taking care of the house but there is also the possibility that the renters will move out and the process of finding a new renter starts all over.  My dad ended up selling the house for around $300,000.  He gained about a hundred thousand-dollar profit from when he bought the house in the late 90s, when the housing market was lower. 

            One suggestion my dad has for me is to start saving.  I earn $50 a week for allowance, and I’m starting a job in a couple of months.  If I save 10% a week, five dollars, for a whole year (52 weeks), that’ll make me $260.  Saving will also teach me good habits for the future when I have a real income.