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I'm mainly curious about this from the context of primary residence, but it might make more sense to view it at least partially as a real estate investor. This question is really about when the price delta is largest between big and small homes.

Let's say that you have the money for one giant mansion, or, alternatively 5 small single family residences in the same vicinity. You decide that during really hot markets, you are going to choose one of those options, and when home prices soften, you will switch to the other option. Given that choice, what would be the best way to maximize return on property value (ignoring rental income)? Should you buy the big house when prices are up or when prices are down?

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    There are much easier ways to make money. Best thing is to buy the house you want to live in. Apr 4 at 19:47
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    If you're mainly interested in the context of primary residence, I'm not sure the option of 5 small single family homes makes sense, especially ignoring rental income.
    – yoozer8
    Apr 4 at 19:51
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    @gaefan Most people can't just buy the house they want to live in, because most people want bigger than they can afford. That's like saying you should just buy a plane ticket to the destination you want to go when I'm asking how far in advance is buying the ticket going to be cheapest.
    – BlackThorn
    Apr 4 at 19:58
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    @BlackThorn I think the implication was buy the house you want to live in and can afford. It seems impractical to buy 5 smaller houses for your primary living, or buying the biggest house you can afford but don't like, just because they have more financial upside.
    – D Stanley
    Apr 4 at 20:06
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    @DStanley frankly, I thought this would be a somewhat simple question, but it seems like people are more interested in nit-picking the details. This isn't actually about buying 5 small houses, or one huge house you may not like. This is about selling your property when it is over-priced and getting good deals when you are flexible with your living arrangements, or maybe even recognizing opportunities to enter the real estate market as an investor.
    – BlackThorn
    Apr 4 at 20:20

2 Answers 2

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The answer to your question is dependent on the rate of price increase and decrease for each size of home and that isn't knowable in advance.

If growth and shrinkage were equal, it wouldn't matter because the value of five $100k homes would track that of a single $500k home.

For a single home purchase, it makes sense to downsize when the market is up and to upsize when the market is down because the change in market value will be greater in the larger home.

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  • I'm sure there are general market trends that are at least somewhat predictable between high end and low end homes. The only thing that should be difficult to know in advance is when the market will go up or down. Anyway, do you have evidence that the value of five $100k homes would track that of a single $500k home? I find that pretty difficult to believe.
    – BlackThorn
    Apr 4 at 20:04
  • @BlackThorn "If growth and shrinkage were equal" then BY DEFINITION five $100k homes would change the same amount as one $500k, otherwise growth/shrinkage would not be equal. I don't see any assertion made that such a scenario is actually true.
    – Steve Kidd
    Apr 4 at 20:30
  • Market trends are not predictable, let alone what happens between high and low end homes. Regarding real estate values, the nature of the recession is a factor as is the location. For example, during the 2008 GFC, some areas of the country had modest property loss compared to areas where the speculation was rampant. Cities like Las Vegas, Phoenix, San Francisco, Miami, Los Angeles and San Diego (and nearby areas) experienced 30% year-over-year declines. I'd venture a guess that sub prime lending was probably nil in Nowhere, Oklahoma and similar areas. Apr 4 at 22:01
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Single-family homes (SFH) vs. mansions may not be analyzable. But SFH vs. condominiums shows a pattern: Condos crash lower and boom higher than SFH.

E.g. in San Diego, condos crashed 55% from a 2005 peak, while SFH crashed 45%. From 2009 to 2021, condos boomed 175% while SFH boomed 125%.

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