Reality Real Estate
If r/e is a passing fad for you, and you don't learn to recognise r/e cycles...then your days may be numbered. Pro speculative investors (in any market) take steps to weather the storms...
When I first began to purchase real estate, interest rates for VA and FHA loans were more than 20% for 30 year fixed rate mortgage loans. Does anyone remember how many points we paid?
When interest rates begin their increase and the money supply tightens... homeowners will see their 'artificial equity' evaporate... when their jobs are outsourced or downsized and replaced by jobs that only pay 65% of their previous salaries... many folks will have to sell their homes... homes for which they paid inflated prices.
Even if you don't now consider short sales worthy of your time/effort.... I predict that we'll be seeing more and more situations that require preforeclosure short sales... so if you plan on being a pro who can withstand the challenges of real estate cycles.... keep in touch with TCI.
[addsig]
TheShortSalePro,
You took the words right out of my mouth!! Well put!!
:-o
-FrankSoprano[ Edited by franksoprano on Date 10/27/2004 ]
While I agree that short sales for income and long term holding for tax and eventual appreciation are the way to go, I would also like to make this point about preforeclosures.
When the RE market does change due to interest rates, lost jobs, etc - it will be more likely that peopel with negative equity in their homes (due to 100% financing and depreciation) will not be able to afford to sell their homes as they will have to pay off the negative equity!
This will result in them handing over the keys to the bank. It may take some time for the banks to start offering REOs at larger discounts. While the banks are insured by the gov't quite often, they also have been riding high on good REO resales.
My point is that there will be a transition period that will be hard on REI all around. Weather that and you will be golden.
JoeMac wrote, "This will result in them handing over the keys to the bank."
I don't necessarily agree! When faced with an upside down market, loan servicers will be scrambling to implement any number of preforeclosure alternatives... They won't be accepting too many keys... but they will be encouraging the distressed mortgagor to sell... quickly, and at a discount.
I haven't been on the bearish side of RE. What really happens? Say the rates are around 15% and there are not many buyers in the market. My hunch is that supply will also slide because not many people would want to sell their house that bought at 6%. If the rates are to increase then its because the economy is doing good. ie..people have better jobs and better pay. But I haven't really experienced a bearish RE market, so I can't realy say. I guess it would be a good buying opportunity for people with cash.
Your posts are thought provoking.
And I have so much more to learn, for sure.
But here is a thought/question that you inspire:
If this is the case (and I do believe), will not rents also be affected in a negative slant, thereby affecting cash-flow?
Additionally, will not potential buyers be reduced by these very facts, having a negative affect?
Share more, as I am trying to position myself better for the future.
Lastly, if you were a landlord w/50%equity today, what would you do?
Rents go up as interest rates go up i would assume so cashflow goes up on rental properties you buy now. Buy rentals NOW for the cash flow THEN. Short sales are going to be tremendous to be able to take advantage of. I can already see the increase of foreclosures in my area due to the "refi" boom.
Quote:
On 2004-10-27 12:34, ceinvests wrote:
Your posts are thought provoking.
And I have so much more to learn, for sure.
But here is a thought/question that you inspire:
If this is the case (and I do believe), will not rents also be affected in a negative slant, thereby affecting cash-flow?
Additionally, will not potential buyers be reduced by these very facts, having a negative affect?
Share more, as I am trying to position myself better for the future.
Lastly, if you were a landlord w/50%equity today, what would you do?
[ Edited by Ruman on Date 11/02/2004 ]