I have a question about owning real estate investment properties during a time of a serious economic crisis and would appreciate some insight, commentary, and opinions.

Here is my family's specific situation. The vast majority of my family's assets are the equity in real estate. At current prices the loans on the property put us in about a 50% equity position. We have 4 rental properties ranging from about $130,000 to $200,000 (all with existing loan amounts of about 50% of the property value) each of these rentals cash flow currently, but it is becoming much more difficult to find good tenants. We also own 5 small parcels of land (with no income) and we have loans of about 40% of their current value.

My question is what do we do? I am increasingly worried about an economic crisis. I definitely think the value of real estate will continue to drop. Everything seems so difficult to predict. With a serious economic crisis and the value of the dollar dropping drastically, we will experience hyper-inflation - would this cause the rents tenants pay to rise dramatically along with the cost of other goods? In this scenario, it would actually be of benefit because the difference between our gross rental income and our fixed rate loan(s) should increase, causing larger profits. On the other hand, the asset itself, the property, would be decreasing in value. This brings in another question. If cash is needed by our family this could end up being OK, but the net worth and long term outlook would probably be worse than if we just sold now and invested in gold/silver/other commodoties.

Nearly all of our assets are in real estate and hold very little in cash. Real estate could never go to "zero" like certain stocks or the value of the dollar, but we are hesitant in keeping so much of our assets in something without much liquidity, especially something that will likely lose value in the future.

So basically a couple questions:

What are your expectations for the cost of people to rent during a time of economic crisis? There are a couple ways of looking at it in my opinion. Hyper-inflation should cause rent prices to go up, but on the other hand other investors may be desperate to have good tenants and create more competition driving prices down and people may be cash strapped and not have the ability to pay higher rent prices even though it would be considered an essential. But also you have to figure in a substantial amount of people losing their homes, causing them to rent, so the demand could be high.

With home values going down is it better to just weather the storm or sell now and invest in something else immediately focused on a declining economy such as gold/silver or an ETF trying to capture the inverse of the S&P, DOW, etc. The problem with selling is all but one of the properties are 1031 exchanges, so the sale of the property and non-reinvestment in like property would cause a pretty large capital gain tax (but not as large as if Obama has his way!).

It is a tough call for us and I'm not sure if it should be or not. What are your opinions on holding investment property during these tough times?

(Out of the land we own, only one parcel is really large enough to sustain an active farm or a situation where someone could "live off the land" the others are just small subdivision lots. I am tempted to sell all the land with exception to the acreage (that brings in no income at all) and invest the money from those sales in something.

Thanks, for all of your opinions. I love reading the "Economic & Sound Money" forum!