Quote:
Originally Posted by Cowboy89
If I were you and were satisfied with the paper gains on your property as it stands today I would sell and redeploy those funds away from Real Estate (If all you do is pay down mortgages on other properties or buy a new property, then you're just as exposed to a potential RE slide as before the sale).
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The first part isn't true. If he owned 4 properties worth 250k before, each with 200k in debt, he had 1,000,000 of real estate with 800k in debt. If he sold one, and took the 50k to do mortgage paydown, now he has 3 properties worth 750k and 500k in debt.
So a 10% decrease would cost him 75k in equity instead of 100k in equity. Also, it would take a 33% drop in prices to get to a zero equity situation, instead of a 20% drop in prices before the sale.
Selling and paying off debt is the same as selling and buying a bond that pays the same interest rate as your mortgage, so it does decrease real estate exposure.
Selling and buying more real estate obviously keeps exposure the same, so that part of your point is absolutely true.