Some investors are asking the question... should I keep my investment properties now that the value has dropped? It is an interesting dilemma.
In the past, most investors looked at long term gain rather than short term. Typically, we saw investors buy homes, put them in the rental market and take their gain several years down the line through appreciation. Many lost money on the month-to-month income verses costs and used the loss as part of their tax strategy.
The more recent investor tactic has been to flip the home and make quick profits. This strategy was made possible by the fervor of the market and the rapid appreciation during the 2004 to 2006 frenzy.
The question investors must ask themselves is what to do in a negative or slow growth market? The answer is dependent on many variables.
Does the investor have the funds to hold the property and take a potential negative cash flow in the rental market. If so, he or she may want to take a long term hold and reap the rewards of our next up market. If history is any indicator, there will be another market surge in the next 4-6 years. If the investor is upside down on the property and has no funds to work with, he or she may believe they have no other option but to let the property go back to the bank. However, there are creative solutions.
The rental market is getting stronger as foreclosures increase. People have to live somewhere. The creative investor may seek a partnership. The investor brings a home to the table and a second party brings operating capital. The two groups share in future profits and the investor is saved the problems associated with foreclosure. Be sure and work out a good contract, put everything in writing and have clearly communicated goals and expectations.
Be inventive, resourceful and you may get through this tough time.
Your Imaginative, Resourceful, Real Estate Guys...
Ron Urban & Gene Urban
The Urban Team
Realty Executives
