What happens when you have an investment that has been bringing in income, but then stops? Like a real estate property that the tenant does not renew and you are having trouble finding another tenant. And can’t, or don’t want to, sell the property. Or after buying a real estate property as an investment, but can’t find a tenant?
Answer: It’s always difficult when our investment dreams don’t go exactly as planned, but as in any undertaking you are going to have some losses as well as some wins. The issue is how do you take your “lemon” and make lemonade?
First, take a look at your property and see what value there is in it. Rental income is only one way of making a return on your real estate investment. Right now, the United States is going through a downturn in the real estate market. If you bought “high”, you may be wiser to hold on to your property, at least in part, right now. The interest you pay on your mortgage is still tax deductible (in the US) so you continue to benefit from that advantage, whether or not you have tenants. You may have some equity in the property that you can use to make an alternate investment such as a different property or a different kind of investment altogether.
Another option is to lessen your exposure to short-term loss by bringing in a partner. This isn’t as impossible as it sounds - with the market downturn, there are people looking for opportunities to buy in at a good price. Their “bargain” might be just the financial inflow you need to take that money and look for a brighter option somewhere else.
With your current investment, and with all future investments, go into it with an “exit plan” in mind. There’s more information on this in MoneyMinding Step 10 on Building Wealth: The Foundation. Basically, it’s up to you to decide in advance how much money you are willing to lose - and when you reach that point, follow through with your decision, tracking your loss and using it against your gains in other areas.
May 3rd, 2008 at 12:26 am
Investment property is as easy as people thoughts, so we must prepare to lose money.