How to Profit from the Subprime Meltdown
I am hearing a lot of crying lately from investors who can't get loans approved. No more subprime for buyers, no more no-docs for investors, banks are making it tough again. In the early 90's when I got into real estate, we borrowed at 9.5% with 3 points, full doc, 20% down. No stated income, no "liar loans", no B.S. We still made money. Dry off those tears and face facts: there's always an opportunity in every market! Sometimes the market just makes it harder for something - rentals, loans, buying, selling, there's never a perfect combination of "easy street" for all the pieces. Stop whining and start hustling!
Somebody is making money in EVERY market... will it be you? Here's some of the opportunities in today's market:
BUY AND HOLD
Prices are down in many markets and banks are willing to discount. Those who buy up properties at low prices and finance them at low interest rates will do very well. One bad thing about the subprime lending market is that it turned many renters in buyers, which made things difficult for landlords. The tide has turned in the other direction, and now there's less buyers and more renters. As a result, residential vacancy rates are down, which is good for the buy-and-hold investor.
LEASE/OPTIONS
Whenever the market is good for landlords, it is good for lease/options. Until recently, investors were having a difficult time finding enough rent-to-own buyers because they were competing with subprime lenders. The tide has turned in the other direction, and now there's more buyers turning back to rent-to-own opportunities. Buy up properties well below market, then offer them on lease/option at or even BELOW market price and you will make a substantial profit.
OWNER FINANCING
The credit market has tightened for everyone, even buyers with decent qualifications. The buy, fix and flip is more difficult these days because the low-income buyer has a more difficult time obtaining financing for a cash sale. Offering a property with owner financing will allow the buyer to get into your
property quickly and cover that payment you've been making. Within six months to a year, your buyer will be "seasoned", making it easier to get financing. Since his loan is based on a refinance and not a purchase, the loan qualifications will be a little easier than if he were trying to buy your home now, with little or no money down.
As you can see, some strategies work better when the market is depressed, others work better when the market is hot. You have to adapt your thinking and your methods to make a profit.
Comments(0)