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I would like to personally thank ROBIN ROGERS for posting this article. Look her up and do business with her!
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People need to understand the mindset of investors and how this actually works. To find out, contact me so I can sign you up for our real estate investment college and our premiere education. If you choose NOT to contact me to educate yourself further in the area of real estate investing, please DO NOT complain about this situation regarding real estate investors. None of us knew this until we became educated ourselves. The wealthy write the rules, when you know the rules, you can play the game.
My comments will be in bold text. Let's get started.
------------- ... Investors are swooping in and buying and accounting for most of the rise in sales. This is because we have the right education and the systems in place to move forward. Also we know real estate is the best investment.
"While the purchases are trimming the inventory of unsold properties, most of those bought by speculators will likely return to the market when prices rise again, hampering any recovery", said Nobel laureate economist Joseph Stiglitz and Yale University Professor Robert Shiller in interviews. The smart well-educated investor knows true long term wealth is through buy and hold. Most high powered investors will buy in bulk and rent them for a while. These properties CANNOT be re-introduced all at the same time into the market. They need to be slowly introduced back out into the market so it will not crash.
"We're creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve," said Stiglitz, a Columbia University professor of economics. "We could see a double-dip in the housing recession if that happens." They will not all be back on the market. See above comments. Also, if the economy improves then more people will be able to buy....right?
... The repossessed properties offer opportunities for investors, who typically buy homes at auction and rent them out until prices increase and they can sell. What myself and other investors like to do is buy low and sell them (if we sell and not rent) with equity still in the property to give the buyer the "instant equity." No need to greedy. Make it a win-win for all parties. I would rather sell it quick for less profit, then struggle to sell for NO PROFIT!
"These speculators are preventing the market from crashing now, and when they get out it could fall again." said Shiller, who helped create the S&P/Case Shiller real estate price indexes This is a possibility, but as I said earlier, intelligent investors who treat it as a business to help others can prevent this from happening. Besides with the state of the banks, only serious qualified buyers will purchase these homes. Others will rent keeping everything stable because the homes will be owned by those investors who can sustain the payments.
Dario Moscoso of San Diego bought a three-bedroom foreclosed house in San Diego three weeks ago for $490,000, half of what it would have fetched a year ago. He's renting it for $2,500 a month and plans to sell when prices rebound. "We hope to put it back on the market in about a year," Moscoso, 52, said in an interview. "We'll gauge the market and see how it goes." Don't hope...this is speculation right here. Rent it, cash flow, have the tenant pay down the mortgage and sell it when the time is right.
The "speculative fervor" is returning in the market in part because investors have the edge in buying foreclosures, said Dean Baker, co-director of the Center for Economic and Policy Research. Investors do have an edge, but there is no reason to buy-sell everything for a quick profit. Baker said he considered buying a Washington home at a foreclosure auction last year until he learned the terms of the sale. Winning bidders had to complete the deal within 30 days, half the time of a standard home purchase, or lose their deposits. It was a risk he didn't want to take. Awesome!! He should have taken advantage of this. He didn't do it because he was not properly prepared for it. Part of the system to do this is having private money lenders ready to invest and a team in place to ensure a quality closing to meet the deadline. Having this in place MITIGATES risk! Does not eliminate, but mitigates.
"Regular homebuyers are excluded from the foreclosure market because the rules favor professional investors and that lack of competition is driving down prices," Baker said. Ahhhhhhhhhh NO! The proper education, and ANYONE can do what we do. Even if you do not want to invest, educate yourself so you can compete. I do not know how any more clear I can be!
"In past housing recessions, we didn't see as many mortgages under water, so it didn't matter if the focus was on speed and not on maximizing value," Stiglitz said. "Now, the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets." That depends who is buying the assets. If you sell to the proper qualified individuals, the banks risk is mitigated as well.
"If you're a first-time buyer with a young family, do you really want to buy a home sight unseen and risk losing your down payment?" What? This is not the way to do it unless you are experienced. Homeowners buy on emotion and need to see the property. Investors look at numbers. Big difference! Stewart said, minutes before starting a foreclosure auction in Boston. "Investors know how to close a deal quickly and they don't care what it looks like -- they're either going to rent it or flip it." ------------ True. It depends on the investor and what they want to do. They may flip to another investor who loves buy and hold. It is a game and it is up to the investor and their business model of what they do. It is not rocket science.
So lenders and investors are conspiring to ice home buyers out of the market and slow down the housing market recovery? I do not agree with this. Investors may be doing lease options with their tenants, selling the property in 2 or 3 years to them. It all depends on the investor's strategy and business model.
This seems strange to me, since I work with so many residential investors. They're having trouble getting mortgage programs at a decent interest rate and have to put down at least 20%. Smart investors will have private money in place to buy all cash or buy 'subject to.' There's no FHA or VA program for investors except on VA repos. Last fall, I had one investor--active-duty military--meet all the qualifications for a VA vendee loan, but Ocwen still required 20% down instead of the low down payment advertised. He forfeited his application fee. There are no traditional investor mortgage progragrams for governement loans. Be creative and learn form us!
I suppose investors could find cash or hard money to buy properties at auction vs. trying to get a mortgage. But how does rehabbing and/or renting a house--improving a neighborhood and offering a home to someone who can't afford to buy--contribute to the downfall of our society? It doesn't. If people knew how to manage their money, it would not be an issue. If prices rise again, they would have to rise quite a bit to cover the acquisition and rehab costs. Nope. They factor in all of these upfront based on how much they want to make in the end. If it does not work, they move on to the next one. And if the investor has good tenants in the property, why would they want to sell anyway? Again, this depends on their business model. The current investor may want cash now and sell it to an investor who likes buy and hold.
Should lenders sell their properties only to home buyers? No! Not a chance. Should investors be charged a premium for buying residential real estate? No! Not a chance. And is it true that investors don't even want to look at the properties they bid on? Yes! The numbers determine our decision along with what our strategy is. We put in place UPFRONT a system to make it work.
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Learn to invest and how the game is played! Contact me to change your way of thinking or accept what is going on and don't complain about it!
Are you ready to learn from successful real estate investors?
Tony
***Remarks I received from another site.
Thank you Tony for the well thought out strategies! Looks to me like investors will save this market.
01/13/2009 12:46 PM
by Akron Ohio Homes for Sale. David M. Childress (Howard Hanna Real Estate Services)
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So if my comment has two or more sentences, do you make two paragraphs?! LOL. You truly did a good job going through that article and pointing out the academics vs some realities.
01/13/2009 01:01 PM
by Heath Coker, Real Estate Broker (REindex.com & Cape Group Real Estate)
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I have worked with a few investors/groups and I feel that the newer one's don't really know what they are doing.. The one's that have been at this for a while have been through the ups and downs and really have a great feel for the market and what to do in these tough times. I have an investor that I call when ever I am in a situation that I don't have a good answer for and he always comes through for me.. The newer one's always seem to be looking for an opportunity and don't have much to offer... The true investor will help us out of this market while the others will only help themselves... That is just my view on this..
01/13/2009 01:04 PM
by Michael E. Walsh (RA) AHWD (Abe Lee Realty, LLC)
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Thanks Tony for that great blog and your great startegies! I hope you have a great day!
01/13/2009 01:10 PM
by James Engel KW Beverly Hills (Keller Williams Realty Beverly Hills)
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