The Vultures are picking at the Real Estate carnage.
The “Real Estate Vultures” have swooped in to pick up all the leftovers and I’m one of them.
It’s getting serious out there. “Vulture” real estate investors are now having their way with sellers in today’s market. That means smart investors are now picking up deals for pennies on the dollar.
It’s just like I’ve been telling you for the past few weeks, it’s time to buy.
We’ve finally worked through the first two waves of foreclosures and we have another one coming early next year. With trillions of dollars in ARM’s getting ready to adjust more properties will go into foreclosure.
Now I will look into my crystal ball and make a prediction…
After the next wave of foreclosures has come and gone, I predict that:
- Lender’s will become more flexible in loan workouts.
- Investors will buy up large packages of defaulted paper.
- Sellers will be forced to offer “seller financing” to sell their properties
To the untrained eye this may seem like a cause for panic, but I assure you that this is a cause for celebration. These three things will lead to the greatest opportunity to get RICH in real estate ever. If you know how to handle these types deals you will be able to profit by using these techniques:
- When lenders become flexible on their loan workouts they may even offer some sort of “debt forgiveness” by rewriting notes using new appraisals. The opportunity to take these “re-written” notes “subject to” will be a great tool for investors.
- When the Investors buy up all the defaulted paper they will need money. You can invest in these funds to get a good return on your investment.
- And last but not least my favorite thing about Real Estate. When the market SUCKS it’s tough to sell a property. Owners are typically motivated to hold some or even all of the paper on your purchase. This phenomenon is where the “No Money Down” craze started.
In the past 4 years we really didn’t have too many of these opportunities. Now that the market has tanked say HELLO to real estate investing the way it was intended to be.
I’m planning on taking full advantage of this market. I’ve devised a plan that will guide me through this time and I would like to share it with you. Here’s my two step plan:
- Buy all the Real Estate I can afford
- CELEBRATE
Read what CNNMoney.com had to say about this spectacular opportunity by clicking this link: “Vulture Real Estate Investors.”
I like your optimistic outlook on the market. More people need to read and learn. I will be back for more.
Maggie Gunnels
July 8, 2008
I believe much of what you say is exactly right. I can’t believe some of the unbelievable deals I am seeing right now.
The only thing I question is the seller financing. Especially with this new Foreclosure Fraud law going into effect on October 1. Subject to deals on foreclosure properties may be illegal in many situations. A federal law is also in the works with similar language. It will be tough to offer seller financing unless the seller is current with their payments or if the property is free and clear. During the last downturn (1987-1991), most FHA and VA loans were assumable with no qualifying and thus buying with seller financing and subject to was a non-issue. Now they all have due on sale clauses, and these new laws could make creative financing on foreclosure deals very dangerous.
Rob Arnold
July 10, 2008
Maggie: Thank you so much for reading and participating. I really appreciate it.
Rob: With regards to the seller financing, you’re right about the new foreclosure laws effecting these transaction if the homeowner is in foreclosure.
You have to remember that it’s only about a 30% of all properties that are in foreclosure. That means 70% of the sellers are still up to date and need to sell.
With this crazy market these sellers can’t get their asking price because the REO’s and short sales are screwing up the comps.
If you can offer a seller a reasonable amount on terms that are good for both you and them, then you create a win win situation.
Regarding the “Subject To’s” on the foreclosure properties, you’re right…the new laws will greatly effect this practice. Currently I am working with my attorney to see how this will effect us.
There’s one constant in Real Estate investing… it’s constantly evolving. When one technique is no longer effective we start adapting to the changes and tweaking our deals to fit in the current market.
The whole reason I got into Real Estate investing is because it offers a challenge to my creativity. It would be boring if all we did was make money without a challenge.
Thanks for the comments Rob. I appreciate your contributions.
jrrivera
July 10, 2008
Jonathan you are so right about the changes. Unless you are constantly educating yourself and studying the market, it is hard to keep up. Many things stay the same, but many things also change. When I first started working REO deals, you could call up many of the banks including HUD and negotiate a deal with them right over the telephone. Now it is all computerized and there are so many layers of approval required.
Seller financing was very prevalent years ago, but as the mortgage industry tightened up people got away from it. Now every institutional loan has a due on sale clause and most first mortgages won’t allow a seller to hold a second. I used to offer all my deals that we would hold a second, but not anymore because I know the loan won’t go through if I do.
It is hard to keep up with all the changes. Thanks for a good discussion. I am glad to see you are doing well.
Rob Arnold
July 13, 2008