Lots of ink has been spilled on how our jittery market is impacting homeowners. But it’s hard to find anyone writing on the question that looms largest in the minds of most investors: what do I do now?

There, of course, is no single right answer to this questions – it will depend you’re your risk appetite, your local market, your time horizon, and your view of what the market is going to do next. But from where I sit I see five basic paths forward for investors in 2008:

• 1: Rebalance in the same market. This is what I’ll be doing this year. Investors who have been in the market for a while are sitting on a pile of equity that probably won’t perform too well in 2008. That means it’s time to sell, re-leverage, and put it back into properties that will give you the right cap rate. I wrote about my specific example a couple of days ago. Although it’s no fun selling in a soft market, when you’re buying and selling at the same time it’s a wash. Price your property right and it’ll sell – and at the same time look to buy a property at the same sort of discount.
• 2: Lift and shift. If you’re in a market like San Francisco, Los Angeles, Florida or Las Vegas then you might be concluding that your market has done its thing and the future looks a bit less rosy. Some investors might be tempted to try to hold on until the market turns around and hits the peaks that it enjoyed during the acme of the roller coaster ride, but a better idea might be to sell now, grab that equity, and re-invest in a market that is less overvalued. Consultants like Jeff Brown in San Diego are advising this type of strategy, moving investors from California to Texas.
• 3: Bargain hunt (speculative version). Fifteen years from now they’ll be asking “what did you do during the market correction?” Well unless you have your crystal ball you don’t know now what the best answer to this question will be, but investors with a speculative bent are looking for the bounce. Again, this is a speculative view. Not that there’s anything wrong with that – as long as you're aware of the risks you're shouldering. There’s nothing so dangerous as someone who thinks they’re an investor but in reality they’re acting like a speculator.
• 4: Bargain hunt (value version). Regardless of your view of what’s going to happen next, in many markets the current correction is creating some great value deals – properties that you can pluck straight form MLS that will generate a positive month-to-month cashlfow with only a 10% down payment. You won’t be seeing many of these in, say, Las Vegas. But you will in Fort Worth, Tulsa, and Kansas City. You’re not looking for the dip with this strategy – you’re just poking around in a relatively favorable market for positive cashflow investments. If the market bounces then great. If it doesn’t then you’re in good shape to weather the storm.
• 5: Ride it out (do nothing). Good traders will acknowledge that sometimes their best trade of a given week was one that they didn’t do. Strategies 1 and 2 require you to have some underperforming equity to re-deploy. Strategy 3 is strictly for speculative high-rollers, and Strategy 4 only works if you’re living in the right kind of market. So what if you’re in the “none of the above” camp? Well patience can be a virtue in investing, and I’m not in the “now is always the best time to buy” camp of real estate investors.