Question

Timing is arguably the most important aspect of real estate investing. Discuss the bell shaped curve representing neighborhood & economic cycles and the effect on real estate values?

Answer 1

Bell shaped curve represents the different stages of the economies and corresponding real estate market. The bell curve starts with the recovery phase and moves to the booming phase that peaks at the top of the bell curve. Anybody investing at the beginning of  recovery and selling at the peak, will be the most profitable., because at  the beginning of the recovery value of real estate property is lower and it is the right time to invest in these properties. At the peak, the price is maximum and it is the time to sell and gain maximum value. Afterwards, the market saturates and gets flooded by the oversupply of the real estate properties. Now, the price starts decreasing and it is not the right time to invest. Finally, it is the recession phase that has lowest value of the property. Selling at this time, will deliver the least value. Though,  this time is the right time to buy these assets, and hold it till the market enter into the new bell curve and new cycle starts.

So, it is the timing that is most important and it can be understood by the movement of the economic cycle along the bell shaped curve.