Sell your house to protect the profit? : Rooftop Views

Rooftop Views

Sell your house to protect the profit?

Yes, you read this right. Some people are actually considering selling their primary residence - which has increased in value by thousands of dollars in the latest real estate run up - in order to protect whatever profit they have.

A home is the biggest asset that most people have. And, we believe, one of the biggest sources of retirement savings. We think people who say Americans don't know how to save don't understand that savings doesn't always have to be sitting in a passbook account collecting 2% interest. But that is for another day.

Since most people saw huge increases in the value of their homes in the past 5-7 years they are now concerned that there will be a real estate down turn which will take that profit away. But, if they sell where will they invest? We have read about investing in dividend-paying stocks as well as other stock related investments.

Problem is, there is no guarantee that the stock market won't experience a down turn. Historically, real estate has out peformed the stock market. And the rate of return on real estate investment has usually been 2% or so higher than inflation. We can understand being nervous about having all your "eggs in one basket" so if that's the case, consider taking out some of the profit throgh a refinance and spreading your dollars into other investments - stocks, bonds, and other pieces of real estate.

We think selling your primary residence to "protect the profit" may be one of the most irrational ideas we have heard in a long time.