My rental business has not changed because of the market, except I have been buying lately at a bigger discount (50 cents on the dollar or less). What are you buying Wallace?
I bought a mobile home for 300 bucks, and a house for 35K last month.
House will rent for 900 a month section 8 or 700 a month market. It is a 3/2 1200 SF house built in 98. Tax value is 84K. Banker is telling me 5.5% rate for 15 year fixed to get my cash back (bought it outright). I will believe it when the beans are on the table.
Mobile home I am trying to sell on a note for 250 a month for 3 years and 500-1000 down. I put about 3500 into it including the moving (had to move it) I’ve lost my financial calculator, but I think the yield on that note will be ok.
Both were just finished a week ago and i’ve had tons of calls for both but no qualified takers yet, so these aren’t final numbers.
The problem I’m seeing more and more is FINANCING! Not for us, but for our buyers.
I still buy and sell single family homes but my last sale had no fewer than 9 people apply for, and get turned down by lenders. The interesting thing was ALL of these people were PRE-APPROVED, NOT pre-qualified, PRE-APPROVED. Their loans got squashed in under-writing. The banks are very scared.
It’s going to get very interesting up here (New England) As we hit the high water mark for these foreclosures (2008) banks continue to tighten because THEY continue to take back more and more homes. The system normally used to absorb that inventory has been cut off at the knees (investors buying, fixing, and RE-SELLING these homes)
I pay cash for a lot of my properties but getting a BANK to loan the new buyer money is becoming a big problem. You can always rent them as we all know, but investors are not going to absorb ALL this inventory and prices will continue to fall.
As much as I hate renting residential homes to people, at some point prices will get so cheap that I may have to bite the bullit and get back in for a few years. As the economy weakens my prediction is CASH BUYERS will have no problem picking up homes for 25 cents on the dollar. 10 years from now we’ll all look like geniuses.
A point here, is that every market is different. Everything is being lumped together as a whole in the “US housing Market” and it’s simply not true. You need to determine where your market is at in its cycle, and adjust your investing strategy to fit the market. Here, for example, we’ve only had 11 foreclosures for the WHOLE county for the month. That’s LOW on average.
Financing issues are facing practically everyone, yet again, I’m sure that it’s worse in areas that are being hit the hardest with foreclosures. Again, it’s really as simple as following the principles that you should be doing all along, which is leave nothing (or as little as possible) to chance. You should already have lenders in place that WILL do financing on the property based on some of the worst case scenerios for buyers. Don’t rely on the buyer to get their own ducks in a row.
I was speaking of MY market, and NO ONE should take anything I say and apply it as gospel in their market. That’s the reason I ALWAYS note the area I’m from in these posts.
As far a lining up financing for these people, that’s a GREAT point. As I stated in the post EVERYONE of these folks were PRE APPROVED. Like you said…Having alternative funding available for these people can get deals done. BUT…how do you identify problems if even the BANKS themselves are having to wait until underwriting stage to dig out the rejects? Think about it??..a buyer comes to you with a pre-approval letter that YOU verify, they put down a $3000 deposit, sign a P&S, and THEN you find out there’s a problem 2 weeks later…And this happens multiply times???
That tells me something STRUCTURAL has changed in our banking system.
Alternative financing WAS used to close a couple of my sales. I have a mortgage broker who specializes in private money lending for these situations and he did get the deals closed. Again, the point I was making was this is a constantly changing lending enviroment, and because of that my business plan will have to change slightly to address our/my new reality.
Didn’t mean to sound disagreeable. I was referring more to the media’s views on the situation than your post, fdjake.
As to pre-approval letters, you know as well as I do that they’re not worth the paper that they’re printed on. Anyone with just a little know how, and I do mean anyone, can get a banker to supply them with one.
Yes, I do believe that there have been some changes in the lending industry. It’s all over the news about tightening standards, etc. That said, what I believe that you’re seeing is simply more people trying to play the game that can’t, probably because of a credit ding or two, or job issue, etc. Of course, you’re market is in alot worse shape than mine, too. I think that lenders are definitely tightening up standards in markets that are being hit the hardest.
Yet, if I can get a person with a 550 score, a past foreclosure and past bankruptcy 97% financing, then it’s still possible, just harder to come by.
These are definitely out there. I can tell you as a mortgage broker that you need to get someone who knows how to do FHA manually underwritten loans. Note that I didn’t say “can do FHA loans”, you need a broker that is an FHA expert and can put these deals to the right lenders. You find that guy, and you’ll have an easier time moving your properties.
Thanks for the advice Steve, and I think your right Roger,
As usual the media grabs ANYTHING that gets peoples attention. That’s what their doing with the housing markets.
You bring up a great point about getting people financed with low credit scores. It CAN be done. I think my biggest problem is I got use to the days when you could get a mortgage for a jobless, illegal alien, with no social security number. I’m still amazed at how much things have changed in 2-3 years. Can’t say I didn’t see it coming.
I used to think that all mortgage brokers were the same and had access to all the same programs. Am I wrong in my thinking guys?
The larger brokers are usually set-up with a greater number of Lenders. The smaller brokers try to stick with the Lenders that fit in to their niche.
There is no cost involved for being set-up with multiple lenders. However, lenders will drop you if you do not bring them a consistent amount of business.
I was involved in a franchise operation and we had access to over 120 different lenders.
Most brokers specialize in basic owner occupied refinances and purchases because they are usually quick and easy. I think the key is that you find a broker that is familiar with real estate investing and the necesssary qualifications for investment properties.
I tell my clients to “interview” them. Take the time to find out the abilities and experience of the broker. Do not be afraid to ask for references.
We have 18 investment properties of varied types. In this market, we are offering on short sale and REO single family homes to hold and rent out. All in Las Vegas. Las Vegas has the population growth, jobs and economy to support the investments.
The rent rates have gone up and since mortgages are harder to obtain the pool of rental applicants have risen in both quantity and quality.
Over the past month or two I have closed on some pre-construction residentall (Buy and Hold) properties in Charlotte NC.
From all of my many hours of reasearch on Charlotte, I feel this area over the next 5 to 7 years will be one of the fastest appreciating areas in the country. I like to call it the “Perfect Storm”
Charlotte was also my first real venture. I can’t say I really did all the research. Someone I work with had done it a few times profitably, so we jumped on it this time. Same thing as Wallace… preconstruction.
I was told they stopped issuing new water and sewer permits, so new construction will be slowing tremendously.
Charlotte’s a great area for REI. For out-of-state investors, just be aware that some neighborhoods are appreciating while others are stagnant or depreciating. We got a couple of firms selling investment properties to out-of-state investors based upon the city’s projected appreciation rate and those neighborhoods will be flat for the next 8 years.