Forced appreciation allows me to build equity from the beginning of the investment, so if I need to firesale for an unforeseeable reason, I will likely not be underwater. 

Indeed, where we pay a REALTOR commission, we are initially under water, but look at the long- term probability the rental will remain in the system.

(I bought that house for 73K from HUD in 2001 but sadly it is now underwater.)  

But I’ve seen enough people wrestle their way through this to know that once you’re on the other side, it’s like taking a deep breath after holding it underwater for too long.- Dennis & Jasper

Jon Holdman@Jon Holdman, I am not trying to be vague, like I said I do not know much about this other then the note is underwater and that is why the bank won't finance the loan.

If I buy a house for $400k, and the market drops and the house is now worth $300k, I am under water.

Surprisingly, for some of the complexes the market valuations slipped to under 50% and therefore those properties were underwater, even with "only" 50% debt. 

The other thing to note is most times Pref equity is pretty save assuming a 10-20% market correction but in 2021-2023 we saw a 30% correction meaning pref equity in deal specific deals were underwater without any options.

Forced appreciation allows me to build equity from the beginning of the investment, so if I need to firesale for an unforeseeable reason, I will not be underwater.- Debt-Paydown is a result of time.

@Bijan SabbaghiYou don’t that’s the challenge - we pull data from several places as a note holder and for example and currently we see less than 20% actually going to foreclosure as most are ending in bankruptcy right now due to borrowers equityThe ones that are under water are typically going back to the bank.Best bet is to find properties where deceased or maybe divorced to get higher chance of actually going to foreclosure