Does it feel like there’s either an armed guard stopping you from making offers these days?
That Fannie Mae, Freddie Mac and HUD have real estate investors in a headlock
I hate getting too technical but if you want to understand how and why the government may be trying to STOP you from investing in real estate we need to start at the beginning.
Please excuse the round numbers that are use in this article but due to saving time and actually making things happen I’m not going to pinpoint every date exact. Back when the foreclosure boom really hit this nation, metro Detroit happened to be right in the bulls-eye. Nice family neighborhoods in the tri-county are as a whole were ravaged. There were many factors that contributed to it but in my opinion the top 3 were weak mortgage qualifying perimeters, an over production of newly built homes, and a general belief that houses always go up.
This coupled with the banking system a we know it practically collapsing made it all but impossible for new buyers to buy homes and homeowners to refinance. The the adjustable rate mortgages kicked in and some peoples payments doubled or even tripled. Luckily Big Brother stepped in and handed the banks over 750 Billion with a B dollars in stimulus money. The banks were righted again, lending resumed, and interest rates started to plummet. Along the same timeline Big Brother also stepped into the housing market and forced banks to offer “work outs’ with borrowers to let them stay in the house that they were in by either reducing the interest rate, lowering payments, forgiving principle or for the real lottery winners out there a combination of all 3!
After that dust finally cleared the coolest thing for real estate investors happened since the dinosaurs, Fannie Mae – Freddie Mac – and HUD were given control of 95 some say 99% of all foreclosed (bank owned homes) because the banks stopped servicing the mortgages when they were given the stimulus.
If this comes as a shock to you please let me say it load and clear THE U.S. GOVERNMENT NOW HAS COMPLETE CONTROL OF BASICALLY ALL FORECLOSURES…plus is basically in charge of millions and millions of there performing mortgages.
So what exactly has it meant to the general public, not too much, However, what it means to men and women like us who are crazy enough to be real estate investors is a host of new challenges;
- Only people who will occupy a home as their primary residence for 2 or more years may purchase a house within the first 15 days it’s available
- Earnest money deposits are now a minimum of 10% of the purchase price and next to impossible to be refunded for (this one doesn’t hurt strong investors as we have the cash to buy and always close but sometimes cash can become a crunch and a $1000 of $2000 as a deposit used to suffice)
- Scam artists BEAT honest investors to the punch (yes there are ways around the 15 day rule but you are committing fraud)
- The government is holding “shadow inventory” and there are a ton more foreclosures truly available
- The free market society we live in as far as real estate was concerned is now very tainted – real estate investors and profit in the same sentence are not what the government wants to see
So what are we will do, cry at our cheerios? No of course not what we are going to do is find other ways to get investment properties that we can profit from. Fannie Mae, Freddie Mac, and HUD are not the end all be all suppliers of investment properties. Let’s look at a few different ways successful real estate investors are finding properties right now.
1. Using their big fat mouth! Real estate agents that you have dealt with in the past, or other investors that you may have done business with can be a great source of properties. There are still a lot of listings out there that maybe probate or estate, other investors looking to sell quick, or just homeowners who may actually take your price that you would be offering especially when it’s all cash. Don’t stop working the MLS and making offers.
2. They go back to guerrilla marketing and have bandit signs on the main road, your own website looking for home sellers, and of course direct mail. Direct marketing or guerrilla marketing as I like to call it as a whole different animal and something that I am very passionate about so if you come to a REIA of Macomb event anytime soon you will hear quite a lot about it there. But if you’re smart enough to be reading this investing article and you at least have an idea what guerrilla marketing is – what bandit signs are – & how direct will land you investment properties.
3. Last but certainly not least you should be at every networking event that may put you in touch with other real estate investors. Of course the one I recommend is the REIA of Macomb, But in all seriousness, every single person who is a real estate investor that you come in contact with should know exactly where you’re looking for properties, what kind of properties you are interested in, and how much you are willing to invest. I can’t stress enough how important it is to have a good business relationships. You can make all of the blind offers that you want on houses you don’t know much about to agents who could care less about you & wouldn’t even come close to having the success that you’ll find if you only have five close real estate investor friends.
The moral of this story is yes Fannie Mae, Freddie Mac, and HUD have definitely dirtied the the waters for real estate investors like you and I. Like all good businesses we must learn to adjust, adapt, and conquer.
To your investing success,
Dylan Tanaka – Founder