We’ve been really encouraging you to invest, and look at real estate as an opportunity for your long term investment. Let’s talk about if that does not go well.
Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Bob Nelson: Well that’s an interesting subject, because we’ve seen a situation in 2009 where it didn’t go well. In fact, values on residential properties actually reversed. They declined in value, which means your equity declined an amount, and if you needed to sell, or wanted to sell, or had to sell, you’ll be selling and recovering less money than potentially what you put in it.
Marcia Edwards: Prevention involves things like making sure you understand your equity position. Make sure you have a cushion to absorb, and right now in the state of Oregon, I just learned by an economist, what he was stating was that we typically have 31% equity position in the state of Oregon in our homes. So we are doing a better job at keeping ourselves right side up, with a margin. And that’s great planning. That’s something to think of.
Bob Nelson: Well, not just the 31% equity position, but what would happen if you had … In my position, I like to see that I would be ahead two months in mortgage payments. Get ahead two months in mortgage … How do you do that? As soon as the credit slip comes in, boom, pay on the next one. Do that until you’re two months ahead, that way in the event that something goes wrong and you cannot make the next monthly payment, you would be two months down the road before you’re in default, and another two months before they really start jumping at you. You’ve got basically four or five months to figure out a game plan, a safe exit position, as safe as it might be. But at least you’ve got five months, if you do a little bit of advanced planning. It’s not that tough.
Marcia Edwards: Let’s talk about if you are in that spot. If you are in that spot you’ve got a couple options. You’ve got the idea that you can go into your reserves, dip in and pay a house payment. You’ve got the idea that you could actually have a roommate, or rent part of all of your property out, you could sell the property and that will take some time, so that two months of payment ahead would be ideal in those circumstances.
Bob Nelson: So there’s options. You’re not trapped. You’re trapped though if you go all the way out to the edge of the plank, borrow well in excess of what you can afford to pay, and then not plan for the inevitable that might happen, and guess what? You’ve got a problem.
Marcia Edwards: Talk to us before you get there.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.
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