Predicting how bad the subprime market will get is an exercise in futility. There are many factors that affect the subprime market. They are all interrelated and yet they are all separate. Some examples are as follows: employment, the dollar, interest rates, terrorism, the stock market, legislation, oil and immigration. If you can predict the future of each of those examples, then you’ll be able to predict how bad the subprime market can get. Otherwise it’s just another sound bite.

The best clue to the extent of the subprime problem is in the recent estimates of the dollar write-offs by the largest, supposedly best run brokerage banking firms. One estimate was between $3 billion and $8 billion. If ever a statement said we don’t know what’s going on, that’s it.

Consequently, the best strategy for the fall out from the current subprime market is to prepare for the worst. For income properties that means the following: adequate reserves, a fixed mortgage rate, a good preventative maintenance program, leasing vacant space (at lower rent if necessary), and extending lease expirations (if possible).