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Subject:  Re: Real Estate investing a smart move Date:  3/23/2011  5:42 PM
Author:  JAFO31 Number:  68696 of 88018


"My point was this - stocks may rise or fall but they are NOT hard to liquidate."


<<<Then I suspect she does not want to sell (perhaps because she does not want to recognize the reality of the marketplace).

Unless the house is on or adjacent to an environmentally contaminated site there is probably a price for which the house would sell to someone. Seven years is more than enough time to conclude a sale if the Seller truly wants to sell.>>>

"It's a little more complicated than that.

Mom lives in a 100 year old farmhouse on 4.5 acres in the boonies...well, it USED to be in the boonies. Till they started building office buildings on both sides of it.

So now it's not a 50K residence, it's a 900K piece of commercial property."

It is not a 900k commercial property if no willnig buying will pay that price for it.

"Except the economy crashed and nobody wants to build more office buildings...and she sure as h*ll isn't going to take 50K for something that's easily worth 18x that much, given what her neighbors got for their land."

What her neighbors got for their land (apparently more than 7 years ago) is not relevant to the fair market value of your mother's land today.

"So she sits...and waits...."

Because she does not want to recognize the reality of the marketplace.

Obviously, I probaly do not know your mother's particular market, but I strongly suspect that there have been a number of prices significantly greater than 50K for which the property would have sold, even if not 900k.

There are carrying costs to continue to own the land (and house), with taxes and insurance being the most obvious and maintenance to the extent that someon resides in the home, there is opportunity costs incurred by having the equity tied up in the land, and there is inflation risk.

$900,000 in 2004 would require roughly $1,055,000 in 2011 dollars . What have been the carrying costs?

What if your mother gets a purcahse price of $900,000 but it takes another years. It is not obvious to me that got the same price as her neighbors or that she would not have been better off taking say $800,000 (WAG) in 2005, thereby avoiding 10+ years of carrying costs and she would have had the funds available to invest in comething else, possibly increasing the value even more.

I do not disagree about the illiquidity of real estate but pining for 2004 prices is not necessarily the most advantageous investment either.

Regards, JAFO
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