Let’s discuss dealing with uncertainty.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: You know, they say the only constant is change. Oh boy, do we have change right now. We have a lot of change. So much change and so much motion, so many influences on our economy that we’ve not seen before. And it’s frightening to a lot of people.
Bob Nelson: It really is. The fear when using your capital to make an investment, which is a long-term commitment in real estate, it’s not a buy it today, sell it tomorrow situation. It’s buy, hold for a long-term period of time, maintain the property, in my case, maintain it so that you’re honoring the resident who’s paying you rent so that they wish to continue to be there on a long-term basis.
Marcia Edwards: I would say you start with, think about the coaching you’d get generally for this type of climate, where there’s a lot of fear. You want to know what is certain. You want to understand where your influence is and what you can do to better or hunker down. You want to understand what the worst case scenario is for you. So, individually, take what you can and do a really solid, realistic, and even conservative assessment of your circumstance first.
Bob Nelson: Part of the process, once you’ve identified what the worst case and most probable situation might be, if you see a situation where you may have negative cashflow coming in from tenant rent, as an example, have you set aside a reserve account or set aside a line of credit that you can tap to supplement the rent that came in and the amount that’s required outflow on the mortgage payment?
Marcia Edwards: An interesting point of order here that I’ve heard recently from the economist of Windermere, he said the state of Oregon, the average homeowner owns the home with more than 50% equity position now. More than 50% equity. That should feel good, but you should also honor that equity. You need the margins right now. Don’t feel like you can tap it too quickly.
Bob Nelson: Exactly. But it’s a good idea to potentially set a line of credit wherever you might consider that. It might be a credit union that agrees to put a line of credit on the property. Make sure that you’re not using it to go out and buy a new car or a shiny trinket, a toy, that in fact will decline in value rather markedly after you acquire it.
Marcia Edwards: I agree. Pinky promise with your partner in this situation. Make sure that you both believe that it’s going to only be for some protection in case of an emergency.
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 5:30pm on KPNW for the “Real Estate Today” radio show.