why properties got foreclosed last time?

rents do not go down as fast as price in a down cycle, especially for residential properties. so if you have positive cf, u can tough it out. 

however sometime things are beyond your control, especially if you have leverage:

1. you do not have the MTM LTV and bank will not roll your loan;

2. hard money loan carries high int rate, while tenants want to reduce rents when renewing (when properties next door are in the hands of investors who bought at 1/2 of your price from a distress sale, they can afford concessions). so you might have negative carry cost in a down turn. so it is question of how long you can hold out b/f mkt turns back.

what leverage offers u to amplify return in a good time, it will take it away from u in a bad time. 

real estate is a mkt characterized by 10 year cycle but 3 year memory.

real estate is illquid and u earn a 2-3% illquidity premium over other asset class. however when u r overleveraged, u will be forced to sell at the worst time when liquidity in the mkt evaporates. 

a combination of illiquidity and leverage is a perfect setup for overshooting both on the upside and downside. so active take profits when yld is low and leverage is cheap to preserve and raise cash. do not be afraid to jump in when blood is everywhere on the street and there are plenty of yld to cover cost even if price stays low for a long period of time. 

bottomline is do not get too greedy. manage your leverage and risk.

just my 2c

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• You are right. Managing leverage and risk is very important . -随意1- ♀ (0 bytes) () 10/05/2016 postreply 05:53:20