Due to the URL change I did last week, I’ve been focusing closer than normal on how that change has affected this blog’s ranking within the search engines, especially Google. Historically, I’ve done very little to overtly go after search engine optimization, but when it makes sense, I’d rather not shoot myself in the foot. That’s one of the things I like about the WordPress software. It’s Google friendly, without needing to use any tricks.
At any rate, Wednesday and Thursday I found an interesting search resulted in this blog get #1 placement: “I am losing my ass in phoenix real estate”. That’s a fairly long search query, and upon reading it, I wondered how the heck did Google link that to me? I’ve never written about myself or anyone else losing in the Phoenix Real Estate market. Interestingly, the search resulted in the person getting linked to my post regarding Opting out of Trulia Voices. Every key word in that search phrase was in that post…just strung together in a different way.
This has me thinking though, should I be writing about Losing Money in the Phoenix Real Estate market? Hmm, let’s quickly discuss how you lose money in a financial market. You buy high and sell low. To make money, you buy low and sell high. Sounds easy enough, huh?
So, there are 2 events necessary to lose money. First, you have to buy high. Let’s say you bought a home in an outlying area of Phoenix in 2005. Chances are, you bought high. But you still haven’t lost money. For that, you need to sell low. Selling today would almost certainly require you to sell low. We are in the best buyer’s market in the last 20 years. To attract a buyer today, price will be the #1, #2, and #3 most important motivators, so surely selling today would be selling low.
Instead, however, as an investor, we should be buying! Not selling. Remember how to make money? Buy low, sell high. Today would therefore, be an excellent day to buy, but a really bad day to sell.
If you purchased in 2005, with the plan to sell by 2008, hoping to make a 100% return on your cash-on-cash investment (or more), I can see you how you could characterize your investment as “losing your ass in Phoenix real estate”. But lets not forget that you would still need to sell, to realize this loss. Also, you would need to not buy anything new after selling, thus removing yourself from the marketplace. If you sold, and then purchased a different property (on the cheap), that perhaps has more upside potential in the future, I wouldn’t say you lost, but rather, you reallocated.
Stock portfolios reallocate all the time. Last year I sold Ebay and bought Google. At the time, I took a 25% loss on the Ebay, but have since made more than that back on Google. I couldn’t be happier. Taking the analogy to the Phoenix real estate market, I would sell a property in Surprise today, if it enabled me to buy a property in North Scottsdale.
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