Our firm receives many calls from reluctant condo investors and pre-construction contract owners looking to cash in on what seemed like easy money. The customer wants to know “What should I do?”

Although each situation is unique, in general, the decision can be crystallized in the present value of future cash flows. In other words, translate each strategy into a series of inputs and outputs today and in the future, and discount each cash flow to the present using an appropriate discount rate to obtain a net present value for each scenario. This combines time value of money and decision tree concepts and helps turn an emotional decision into a rational financial decision.

Let’s look at the easiest strategy to analyze: walking away. Basically, you’re insuring a loss on your initial investment, not to mention that there’s a chance the mortgage company will come after you anyway if the sale of the property doesn’t cover your mortgage balance. It is an undesirable strategy to put it mildly and the choice of absolute last resort.

Without knowing your personal situation, I can tell you that there are much more effective options that should be explored that will help alleviate your situation. Contact us for a free, no-obligation consultation and we’d be happy to explore the best options with you.

2. Sell the property: You may feel like you have to sell today. The negative media and the overvalued real estate bubble contribute powerfully to the psychology of investors today. Not to mention the hassles of owning. Or rent the unit while you go about your millions of other tasks and work.

Perhaps the property is in significant negative cash flow and the monthly loss is bleeding through your finances and savings. You feel like you are sinking into a money pit and your net worth is plummeting. Here’s how your cash flows line up: If you’re in an active market, expect to get a significant discount to fair market value at the price you’re getting. In other words, lock in a 10-20% reduction in price that you can get if you decide to outperform this correction.

A word about cycles. At the top of a cycle, things are rosy and projections are that prices will continue to rise indefinitely. We saw that last year. Similarly, today it is hard to imagine that prices will rise again and that real estate may remain depressed for many years. The reality is somewhere in between. Prices will recover, it’s a question of when, not if. Given the negative sentiment, we would venture to say that we have already seen the worst of the correction.

The Sell Your Property strategy also has an element of hope. There is no guarantee that you will be able to sell even if you desperately want to. The reality of selling has to do with how low you are willing to drop your price. But also think about this, in the last correction, Californians who sold their properties near the bottom lived to rue the day, as property values ​​have skyrocketed over the last 10 years, rising roughly 2-3 times in that period. of time.

3. Final Option – Hold and Maximize – When considering a hold strategy, the investor assumes that the market will improve soon. Most experts predict that the current excess inventory will take until the fourth quarter of 2007 to reach a normal market.

How long you have to hold out will depend on how well you bought. The old adage in real estate is that the profit is made on the purchase, not the sale.

In addition to the retention option, you should hire a financial professional to review the financing of the property. Can you withdraw principal, lower your interest rate, defer interest on your mortgage? Each would help reduce your monthly outlay. Our company has programs for investors that very few other companies can offer. And if we can’t help you, we’re linked to a national network of investor loan advisers who are confident we can.

Second, your decision to hold depends on the demand for real estate in the location you purchased and the inventory situation. Are buyers moving to the area, are incomes increasing, is the rental market strong, is there job growth, and what is the rational expectation for the market?

If you would like a full and honest review of your particular situation, please contact us. We can help you make a rational decision and help improve your financial situation. If you find yourself in dire financial straits, contact us immediately. We can help you shift to a strategy that will not only protect your investment, but also position you for a brighter financial future.

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