Why Bad News is Good News for Real Estate Investors
The news is dismal, with mounting foreclosures in many areas of the country. Families are losing their homes at a rapid clip. They may have purchased a home that they simply couldn’t afford in the first place. Or they may have selected a mortgage that is now a problem for them. Huge numbers of variable rate mortgages are resetting, with higher interest rates. These homeowners can’t afford their new payments. They simply must walk away.
Short sales are advertised and in discussion in the media. The problem is that short sales are not really that prevalent due to the barriers in place in the systems the lenders employ. Horror stories are everywhere about delays of many months in getting a lender to approve a short sale, with the buyer going elsewhere in frustration. As a real estate investor, don’t be discouraged from purchasing a property in a short sale, but do the research into their package and where they are in the process. If their package was complete and has been at the lender’s office for a while, you may be in just the right time frame for a purchase. If they haven’t even begun, or they have not yet submitted a comprehensive package to the lender, then you may want to pass. Or, at least look for other opportunities while they get their act together before committing yourself.
Okay, so where’s the silver lining in this housing market cloud? For every homeowner who is in foreclosure, there will need to be a rental home waiting when they are forced from their homes. That’s a simple statement, but a very true one. They aren’t leaving on a spaceship for another planet. They haven’t lost their jobs, and they have been paying home mortgage payments that will fund nice rents. What else is a gem in hiding?
- These foreclosure movers are used to owning a home in a certain area and with certain amenities. They will likely be looking for a rental that will come as closely as possible to replacing what they’ve lost.
- They will be in a long term process of rebuilding their credit, thus they won’t be moving soon into a purchase.
- The fact that they cannot purchase again soon will make them more amenable to longer leases. They aren’t used to moving, and they don’t like it.
- It is just as likely that some bargains are out there in similar neighborhoods. Scooping them up as foreclosures, getting them back into top shape, and placing them on the rental market will provide inventory in locations these people want.
One recent media news item announced that big money is moving again into apartment development. These big money investors have seen the light, so don’t get left behind. After all, if you lost your home and had to move into a rental, would you rather have a single family or duplex unit, or an upstairs apartment unit?