The real estate market is coming off a 25 year boom cycle and has faced a terrible correction in the past two years. Once fantastic markets such as California, Florida and now even New York city are correcting drastically. In light of the drastic correction, many investors and homeowners are upside down in their mortgage and face tough choices of walking away from their homes or facing negative cash flow or even foreclosure. We provide some strategies to stop foreclosure and maximize your investment.

In this article we address three key questions, what does the future hold for real estate, how can investors maximize their investment and for investors stuck in negative cash flow and negative equity, what is the most effective solution.

It is quite clear at this point that sales are drying up in once hot markets. Further more, prices are down roughly 15-25% on average. Normally coming off a 20 year bull market this would not be a significant story. But home equity loans represented roughly 50% of the disposable personal spending of households over the past five years.

The long bull market in housing, where housing did not correct even in the bear market of 2000, led many to believe that housing prices would continue to rise forever. Unfortunately, this belief that the home or investment property would continually generate income and gains has now been proven to be a drastically faulty forecast.

While prices are falling, most investors and homeowners have seen their equity in their homes and properties wiped out. If you were amongst the unfortunate few that took out a home equity loan or bought a house in the past 3 years, you are faced with the very real possibility that the equity on the loan is wiped out while only the loan remains.

Americans – on average - have now all become renters. The reason is simple, we’re all making payments on the bank’s loan with very limited visibility on when the market will recover. We will briefly go over the reasons for our bearish view. Oil is over $100 a barrel, inflation in commodities is rising alarmingly, home inventories are at record highs, the consumer’s net worth is being wiped out, spending and consumer confidence are plummeting, the national debt is worse than ever, the dollar is weak etc etc. The most effective tool that the Fed has, interest rate reductions, has been ineffective in reducing the cost of borrowing due to the subprime meltdown and the credit bubble. This being the case, it has become difficult to create the conditions for investment and eventual recovery.

Needless to say, the psyche has changed and it could be at least two years before we see a noticeable return to normalcy in real estate and investment properties.

If you’re an investor, especially one that purchased in the past 2 or 3 years, you’re likely facing a negative equity and negative cash flow situation. Even investors that purchased thinking they were buying positive or breakeven cash flow property are in negative cash flow situations because of the rapid rise in insurance costs, taxes and other unforeseen expenses, including the very high cost of financing.

If you’re a homeowner, you may well be facing a similar negative equity situation, with a home equity loan but no equity.

One of the ideas that many of you are floating in your minds and wishing you could do is to just walk away from the properties. But you’re concerned about the financial ramifications. Well, it is far better to examine the alternatives than to do nothing.

We’re hearing through our attorney contacts that banks are far more willing to negotiate writedowns once you start the process. For many of you, that is not an attractive option and you just want out of the property. Again, there are strategies that businesses pursue all the time that are essentially reorganizations of debt. And we have qualified attorneys that we can refer you to that will assist you in doing a partial reorganization.

Many of our investors and homeowners are also in financial difficulty and many of these clients have been able to buy time by fighting a foreclosure filing while simultaneously organizing a bankruptcy reorganization. The key question is the hit to your credit. However, for families facing dire financial situations, the credit rating should not be their sole primary concern.

If you are interested in possible exit strategies, then the time for action is Now while you still have options. The worst feeling in the world is letting someone else decide your fate. Our attorney resources are there to help you. Business is booming so they don’t need to spin you any tales nor do they need the money. They will offer you frank objective advice and create a strategy for you that will buy you time, create a plan for reorganization or just inform you of your options. There is no pressure and the consultation is free.