Months ago, I pointed out how eerily similar today’s mortgage crisis is to the Savings & Loan Crisis of the 1980’s. And it’s become even more true today.
The news this morning is that the government is now publicly giving serious consideration to establishing an entity similar to the Resolution Trust Corporation that was formed in 1989 as a government-owned asset management and distribution organization. Basically, the RTC existed solely to sell off foreclosed properties for whatever they could get.
All of that is just financial market jargon. What really matters is this:
If the government uses this model again, then an independent entity will be created which will control hundreds of billions of dollars in “bad” assets - almost all of which will be foreclosed properties. And if history repeats, the deals that will be available to real estate investors will be ASTOUNDING.
This is still a very fluid situation, and I’ll share more information with you as it becomes available. But this much I know for sure now: Arrange your affairs so you can get your hands on some cash. Big things are happening.
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15 Comments So Far»
I’m in keep me informed, I love to get my hands in
I remember the RTC very well. Bought 1 property at auction the first round. Problem was, by the second round of auctions they were selling to owner occupied only in my area.
Another problem I ran into was the pre-qualification workshops they ran for the second round of auctions. The RTC rep would not qualify me to bid as I had rental property, and the requirement was you had to live in the property you bought for a year or two before selling. I forget the exact time specified.
If they open the biding up to investors this time, it will be a great opportunity.
I too experienced the same issue as Bill. I was not able to qualify the second round due to income property I purchased during the first round. However there should be plenty of deals to be had.
Please keep us informed.
I’d like to be keep inform as well. Thank you in advance.
Remember that while you can only live in one house at a time, you can have partners that live in other houses.
Why not work out a deal with someone to buy and live in the house for X time and then split the sale profits? Unless they restrict sales to a single person on title, this should work.
People are already figuring out “get arounds” to exploit our failed system. Great. Just great.
The premise of your statement is flawed, assuming the common negative connotation of the word “exploit”. I can’t imagine why it’s a negative thing to brainstorm ways to take best advantage of the situation that the government has forced upon us. — Bryan Ellis
Bryan, have you found any stats on the actual number of SFH REO’s at this time? Hard to guess, the way the media reports things, you’d think every other home in the country has been foreclosed.
It would be great to know total REO’s by city or state, so we would know where to find the best deals.
That said, as I recall, the window closed very quickly on the RTC deals for small investors, and they went to bulk sales that only the big dogs could afford. I’m guessing the big money sharks are drooling right now.
Jeff, have to be very careful how this is done. It can be construed as fraud depending on how it is done.
** It would be great to know total REO’s by city or state, so we would know where to find the best deals. **
Prowl around these analytical sites:
http://www.MGIC.com
http://www.PMI.com
Jeff, The fine for getting caught buying owner occupied property as an investor was $250,000……..not many tried that I’m sure…
Caught? Fined? Oh please, my dog owns more property than I do.
Just kidding.
or am I…?
Keep up the good articles. Any thoughts on raising capital, certainly my technique of shorting financials isn’t going to work anymore…
@Chris & Bill: Yes, how you do it is very important.
Note: I said partner with someone who will live in the property. If that person is on title and living there, it is owner occupied for the current definition of owner occupied.
Jeff, you’re correct that non-owner occupants are allowed under FHA guidelines; not so much under conforming guidelines.
@Caitlyn Coyle: I’m not talking about non-owner occupied. I’m talking about partnering with someone who needs a place to live for a year and putting them on title (with a contract between you and the partner). If nothing else, you can provide the loan for the person that is due in one year (not my preference though). In fact, it’s likely that you could be on title with the partner for added protection but it all depends on the actual wording of the offer.
If the two of you buy the property–that is, you provide the down payment and the occupant provides qualifying income and credit–the occupant has no skin in the game (not even first and last months rent!) and all rights of ownership. You would have to gift that person the down payment or you’d have to give him the down payment and have him put it in his single ownership account for three months while the money seasons. If you did this with a family member, it might work; otherwise, I think you’re asking for trouble. If you signed an agreement outside of escrow, you would be admitting that it wasn’t the occupant’s intent to fully occupy the property.
The parents of my friend loaned her and her husband a 20% down payment and signed a gift letter for over $100,000. When the couple divorced, they sold the property. It was expected that, under the circumstances, her parents were to be reimbursed. Husband said, “No, they signed a gift letter. Wife, you do what you want, but they get nothing out of my share of the equity.” There was nothing the parents could do about it.
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