Strategy for Decling SubPrime and Housing market

With the meltdown of the sub-prime industry, it seems financing, tightening credit and higher rates are causing more difficulty for retail and challenged credit borrowers to get funding.

How are investors supposed to get their retail and challenged credit buy buyers interested in buying and financed in this type market?

For investors that “get properties under contract”, is it time for them to offer owner financing to retail and challenged credit buyers, create mortgage notes and then sell at closing to note buyers?

Any thoughts? Thanks in advance.

I may be ahead of the crunch wave but I just closed with a mortgage at 6.2%. It is not the lowest that I have gotten but it is in the ballpark. I think we need to make sure we stick to basics and we will be ok. Speculators may be in trouble because there is no basics for speculators. If we look at this as a business I think we will be ok. I don’t care what happens in this economy as long as people have jobs, they will need places to rent and they will rent from me because I will provide them what they want. In Houston that is a 3 bedroom 2 bath 2 car garage house that is 1500 sqft or more that can rent for $1000 or less. If you buy them at a steep discount and make them perfect properties before we put them on the market. If we screen the prospective tenants then we will be able to make money at this.

The guys in the suits at the banks are having trouble. They are scrambling to not lose money, but they still need to loan money or they don’t make any money. In all their scrambling what they are doing is looking for people just like us. People that will be able to pay them $15,000 in mortgages every month without fail. They are making off one guy what they would have to find 20 people to make. They also know that after 4 houses I am more solvent than before 4 houses because if 1 house goes empty the rents from the other 3 will pay the note. The more I buy the more desirable I become to lenders.

With less financing avaiable more people will have to rent, therefore buy multiunits! :cool

 For some reason, fourplex's in my area aren't moving.  It's hard to get loans on these, because it's hard to get comps.
 I believe that a good strategy right now, in general, is to buy single family homes with 30 year direct am loans, then offer these properties for lease option to buy.  You should be able to collect about 15-20% more than market rents for a lease option.  You can also legally write clauses into the contract, which require the tenants to be financially liable repairs and improvements.  You can also write lease agreements that are longer than one year.  This minimizes the expenses of maintenance, repairs and vacancies.  With less people qualifying for loans, more will want to try to get into a lease option.  If the value of the property falls, then they have paid 15-20% more than market rent, and they probably will not buy.
 This is almost like selling stocks short during a bear market.
 Right now, the government is considering increasing the limits for Freddie Mac and Fannie Mae, in terms of how many mortgages they can carry.  This may well taper the paranoia that is crushing the credit markets.
 Based on his posts, I think that Bluemoon runs a smart business.  Right now is a good time to get mortgage money (if you can) because interest rates are still historically low.

What meltdown are you talking about?

Only 1% of all loans in 2006 were subprime, and only 14% of those are 90 days past due?

Did I miss something here?

Get em Pete… :biggrin

What meltdown are you talking about?

I think he just woke up from a LONG sleep!


So far around 50 subprime lenders have gone under. American Home Mortgage (10th largest US lender) just filed for BK protection and they aren’t even a subprime lender, they are ALT-A. And the list goes on…


according to Inside Mortgage Source a Credit Suisse analysis, subprime purchase dollar originations were 20% of the market in 2006. Alt-A was also 20%. call it whatever you want, but the finance landscape is changing. many investors will find it painfully difficilt to purchase investment real estate with a pre August 2007 strategy. the long term affect of this will likely be fewer foreclosures. i’m hoping FNMA and FHLMC will gobble up some market share and as a result offer a better product for the not so conforming borrower.