Kevin Cronin and REO Speedwagon once sang
Ridin’ the storm out,
waitin’ for the fallout…
I must confess right here it’s one of my favorite songs, ever. But I don’t like it when it concerns real estate investing. Fortunately, here in Kansas City our income property hasn’t had too much fall out. But around the country? Forget about it.
Because the California and Florida and Las Vegas markets have experienced tremendous fallout many people in more stable markets like Kansas City, Charlotte, Tulsa and Dallas still feel apprehensive about moving forward with acquiring more investment property.
So I wanted to give you some food for thought. First, I like what Christopher Smith over at Equity Scout has to say on the subject in his post titled Five approaches to today’s soft real estate market. Read it and see what you think.
Here Are My Thoughts
If you have a non-performing property right now, sell. No if’s ands or buts. I don’t care if you lose money on the sale. What would you rather do? Continue to lose money every month indefinitely? If it’s a non-performing property in a less than desirable location cut your losses and run.
If you have an under-performing property right now, hold. Maybe you counted on appreciation to get the price up quickly so you could raise rents. Maybe you counted on rents rising faster than they did. Either way, whatever small amount you might be losing will probably be offset when the market begins to rebound. Will that be next year? I don’t know, either. But depending on your situation I would advise you to hold tight.
If you are lacking leverage, go ahead and exchange. So you sell for a bit less than you want to because it’s a buyer’s market. Guess what? Whatever you buy you’ll be able to buy for less than that seller wanted to sell because it’s a buyer’s market. 🙂 What’s more important here is keeping your capital growth on track to get to your retirement on or ahead of time. Not whether you bled every penny out of your property that you had hoped to get.
If you have cash now (or assets) and are thinking about more property, buy. It’s never been easier to buy at or below market here in Kansas City. And believe it or not we still have areas of modest appreciation. Call or email me for specific examples.
Of course, everybody’s situation is a little unique. These are generalizations and not intended to be specific advice to anyone. We’ll have to sit down over a coke to see when and where you should go.