Real Estate Investing - Buy Low and Sell High

Buy low and sell high, real estate words of wisdom! Ah yes, it sounds easy yet almost NOBODY follows this rule. Hey it is not your fault, this is one of those little anecdotes that seams so obvious that no one explains it. The expression seems to speak for itself! “Buy Low and Sell High”. This applies to any purchase whether it be a purchase for personal use or a purchase for an investment. We should all Buy Low and Sell high. However in absence of explanation on how to do this we rely on our emotions.

Buy Low and Sell HighWhen our emotions see everyone else buying we assume we too should Buy (WRONG). In fact, this is wrong in so many ways. As a realtor I have watched many seller markets that were so powerful that buyers were racing to get offers in and accepted before the next buyer came along and stole their opportunity. This kind of excitement led everyone to believe that it must be a perfect time to buy because everyone was buying. Admittedly, I can see the rational, however the rational is not logic talking it is emotion.

It is sort of like auction fever - when everyone is bidding on the cheap pink toilet seat, EVERYONE wants to bid on the cheap pink toilet seat (but why)? It is the assumption there is a value in the darn thing. Here is the reality. The sellers of these properties have strategized that if everyone wants to buy, Hell I will sell them my property at an inflated price. Why, because they can sell at top dollar and sell quickly and make big money.

This reminds me of a quote from the world famous investor (Warren Buffet) who says “be greedy when others are fearful and be fearful when others are greedy.” Here we can see the sellers were greedy and their greed made you, the buyer, pay more than you should have to make a purchase. This is where your role should have been fearful and ran the other way. See you were controlled by your emotions and wanted to buy along side all the other buyers when you should have been controlled by the fear that the people you are buying were being greedy.

Here is the simple test.

  • When you believe sellers are fearful Buy”
  • When you believe sellers are greedy Sell (you can take your large profits and buy in a market where they are fearful)

In short: always reference the Sellers

  • Sellers are fearful = Buy
  • Sellers are Greedy =Sell

At any point in time both markets exist. Check back to this website often and we will help you ascertain the fearful markets from the greedy markets helping you to know when (and where) to buy low and sell high.