Real Estate Hedging

Discussion in 'Economics' started by K.C., May 26, 2005.

  1. K.C.


    I just wonder what would be the best way to hedge against a decline in residential RE prices.
  2. hcx is one very popular way -- as are the component issues. bonds would be another. maybe you could sell an otc futures on your house.
  3. A simple way, although not quite hedging would be to remove as much equity as possible from your home.

    $50,000 today can generate $35,000 a year tax free for the rest of your life in about 25 years.

    PM me for details.
  4. gotta give him credit for shameless chutzpah.
  5. Reducing your real estate exposure is the obvious way - if you have significantly overvalued investment properties in speculative/frothy markets, then sell up and certainly don't buy more. If you are financially overextended with your main residence, consider downsizing, or taking on a lodger to boost cashflow. If you are buying for lifestyle reasons, then get a small place acceptable for your quality of life, don't overextend on an unnecessary glamour property. If you invest, make sure you work out all the possible contingencies, including a significant price fall and vacancy periods - would this cause you merely inconvenience and paper losses, or would you be in danger of being foreclosed on and becoming a forced seller in a bear market? Is your cashflow positive and stable, or negative and insecure?

    If you have been long investment real estate for a while, you will have significant profits. Consider selling some and diversifying the equity into alternative investments such as non-RE related stocks.
  6. Retired


    Just move to a cheaper area. That's the most popular strategy.