Wednesday, December 4, 2013

Biggest Real Estate Crash in Decades - What to Do With My Investments Now? Part I - There is Hope

For those who purchased investment rental properties before year the 2000, or had the foresight to invest in recession-proof locations like San Francisco or Seattle, it's easy to navigate the current real estate recession. However, it's a lot more complicated for the people whose real estate investments have dropped between 30%-50% in value, and are stuck with an adjustable interest rate loan that might skyrocket at any moment.

You may think bankruptcy or foreclosure is the only options, but there is hope. There are less financially damaging alternatives to bankruptcy that aren't too difficult to pull off. Below you'll find what options you have if you're in this situation, and how to decide which avenue best suits both the current market and your financial and personal needs. These options not only prevent a bankruptcy or foreclosure record but also will likely turn out to be profitable for you when the housing market improves.

Two Options to Consider - Unload or Hold

You can either unload your properties or keep them for the long term. When you unload a money-losing property, the main challenge is to minimize further damage to your financial and credit history. On the other hand, when you hold onto the property, the main challenge is to generate positive cash flow and wait for the market to improve and allow you to make a profit. This article discusses various aspects of consideration to help you make a financially-smart decision and overcome the challenges.

Historically, when any market crashes, it eventually recovers. Conversely, if a market gets too inflated, it will correct itself by losing value. It's a safe bet that the real estate market will regain its value someday. Cyclical market trends are the only norm in this volatile market.

The real estate market has simply over-corrected itself from the peak year of 2006. Depending on location, 2010 real estate values have reversed back to that of the late 1990s, literally erasing not only the 21st century boom, but also any appreciation since the last real estate downturn in 1989.

Yes, prices are bad now, but the market will eventually recover. Therefore, if you can afford it, hanging onto your properties could be a smart move, because it'll give you a chance to make money off of them in the long run.

Think About Long-Term Growth

Instead of asking if we've reached the bottom of real estate market, we like to ask "Will the real estate market value be higher in five years than it is today?"

If you take a long-term view, now is actually an excellent time to invest, rather than to sell. Likewise, it's an awful time to dump your investment properties unless it's a calculated decision based on the principles and criteria recommended later in this article.

Of course the outlook of overall real estate market cannot be the only consideration when you are making choices for your INDIVIDUAL properties. Real estate markets are extremely localized. For example, the Phoenix market is very different from that of New York City.

Stay informed by reading local news, talking to real estate agents, investigating trends, and evaluating data carefully. One caution is that real estate agents tend to be more bullish or bearish depending on what they need to be to earn your business. You will notice the news issued by the National Association of Realtors tends to paint rosy pictures and its economists tend to be much more optimistic than the average economist.

To research the latest local market conditions, read some real estate agents' opinions and data they have provided, visit RealtyTimes. Navigate to their Market Conditions and choose your state and city to read more details.

Consider Combining Several Different Strategies

Remember, if you own multiple properties, you don't have to make the same choices for all of them. For example, it worked great for Real Investor Tips to short sell a few properties, while modifying loans of others. Combining these strategies allows you to pare losses and hold onto future winners.

In addition to considering each individual property's future potential, keep in mind that there might be negative impact on your personal credit and finances after a short sale or deed in lieu or foreclosure. You can always follow the tips in this article to minimize the damages.