Home prices dropped in 2008 and I heard a story from a colleague of mine that they lost their house because their home was not enough collateral for the loan. So my question to all my BRRR and 2008-era investors - how did you exit or hang on to your properties? You have to leverage a lot of real estate so what happens when your home prices drop under the borrowed amount?
Most of us retire to Florida and play shuffleboard :)
Anyway, yes you asked two different questions. The one in your title, most savvy ones just wait around for those on the edges to start falling off, and then picking up their properties at fire sale prices as mush as possible/practical. As for value vs. leverage, that only matters if you can't make your note. If you can't, then you're one of the edge people above that sells your investment at fire sale prices.
Forget the rest of us. We are all in different places and have different risk tolerances.
Make a list of all your properties
Next to each one put value, loan balance, interest rate, loan term 5 or 7 years, years till refi, amort period, cash flow, capex or maintenance needs, price appreciation strength, rental rate strength.
Now rank them. Determine your tolerance level then adjust your holdings. Based on potential LTV%, strength of cash flow or rental strength, potential capex needed, etc etc
If you have loan terms coming due in the next year or two and you want to keep the property then refi now. Get your 5 year or ask for 7 years. If this is structured as commercial. So you give up 3.3% and get 5.5%. You get a new 5 or 7 years. As many have mentioned as long as you keep making your payment the bank doesn’t want your property. As long as your not underwater now, then your ok to refi. If your underwater now, probably best you get out now.
Now do some what ifs. What if you lose one tenant? Two?
What if you have a capex need of $10,000. $20,000. Etc
What if you have a day job and lose it?
What if you get divorced?
What if? Basically stress test your positions. Then adjust your position or not to fit your risk tolerance.
