Real estate investors have struggled over the past five years, as rising inventories have driven down home values and home rental rates. The chaos created by the booming housing market that ran from 2004 through 2006 still reverberates through our Tallahassee real estate community, and many struggling real estate investors are looking for ways to hang on.
Recently, long-time reader "Dave" wrote to me for advice about his investment properties, as Dave is much like everybody else in the Tallahassee real estate investment market:
I have 4 upside down investment properties, I am struggling to keep things afloat. 3 properties have adjustable rate mortgages which begin next year. I can't refinance due to loan to value. Any suggestions. I don't want to do short sales as I have excellent credit. Thanks
I wish I could tell Dave a quick, snappy answer that will cure his problems, but unfortunately the answer will rely heavily on information that I do not currently know about Dave and his detailed situation.
Real Estate Investors Have Four Option
Every homeowner has four options when it comes to deciding what to do with their property, and investors are no different. So, here are the options Dave has to explore when deciding what to do:
The first option is only available if he is willing to live in one of the properties. Since Dave is dealing with 4 units, this option is removed for 3 of them. Of course, he could sell the homes, but he believes he is upside down in them. He has been leasing them out, but from what I can read in his question, rents have not be as strong lately and he is worried his interest rates are going to adjust upwards. The final option is he can quit making his mortgage payments and let the banks take the properties back, but with perfect credit, this seems like a crazy option as well.
Advice For Struggling Real Estate Investors
There is no "one size fits all" advice for people in Dave's situation. I like to sit down and discuss with them ALL of the issues that they should consider. Usually I can point out some options that the investor has not considered, but at the very least I let them understand that they are not alone. Many people in and around the real estate investment market are struggling right now.
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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.