We often get questions - like the one below - regarding whether a client should sell after seeing neighborhood appreciation or stick around to see what happens.  

QUESTION: 

Should I Take All Profits From the Sale of Old House and Invest in a Better House?

I'm living in DC and purchased a brand new condo a year ago. This was my first home purchase. I bought early in the construction process and was able to get a very good price compared to what the other people in the condo community paid. The neighborhood is quickly changing for the better, so I expect property values to continue to increase. 

That being said, a neighbor in the condo just sold, and based on that selling price I'm comfortable estimating I could sell for $100k more than I paid a year ago. Assuming that is true, would it make sense to invest all of the profit in a new house ($100k more than my current home)? I feel like that is the safest investment, but I'm new this and wanted to hear what insight you have. Thanks in advance for your help. 
 

ANSWER:

Getting into a new condo during the construction process is a great way to turn a profit in a gentrifying area. I've seen this work out well for clients in many different cities, but I've also seen sellers miss the boat when it comes to taking profit off the table.

Your decision of whether to hold or sell should be based on a number of different factors, but is usually driven by 1) the amount of appreciation that you can capture, and 2) the new housing stock (comps) that will be introduced in the neighborhood in the future. If there are more new units like yours being built, chances are that a buyer will opt for the newer condo - with all else being equal - and your condo may sit on the market or sell for a lesser price.

If you can take the profit now and find another area with similar appreciation, you'll be able to trade-up into something even nicer.

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