This is becoming more of a regular question, considering the current market:  I met with a client recently to talk about his real estate holdings.  Jack was having a hard time with his cash flow.  He had borrowed money on his appreciated properties and the rental increases had not kept pace.  He was now asset rich and cash poor.  He had what the industry calls “ a liquidity problem”.  He was not sure what to do next.

I told Jack that there are a couple of solutions that can be pursued:

-  First, he could sell one or more of the properties and put the net equity into a reserve account to help off set the costs of the remaining properties until the rents can be increased to cover more of the expenses. 

-Next, Jack can take on a partner in one or more of his properties.  For a fixed amount of cash, Jack could sell a percentage interest in his properties to a fellow investor. 

- It is also possible that Jack could apply for a ‘blanket loan’ that use several properties as collateral so the combined equity was sufficient for a commercial bank to provide a line of credit to Jack to be used for reserves. 

-Jack might also establish an escrow account with the commercial bank that made periodic automatic payments on his various property mortgages.  This is more of a directed source of funds that cannot be used for other purposes (the line of credit can be used for any purpose).

A good source for partners and lenders is your local real estate brokers and community bankers.  If I can help you with a liquidity problem, please e-mail me at jane@janefairweather.com

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