The mortgage industry fallout and subprime meltdown finally hit home. After accepting what appeared to be solid offers on two quadraplexes, the buyer call to withdraw them. Her grounds? She expected to put down 10% but discovered she needed 25% for each of them. Obviously, she was pretty surprised. But there it was, as obvious as an eviction notice, the lending industry troubles have hit home.
The days of buying investment properties with little or no money down are over, at least temporarily. The good news here is that the market is stabilizing itself. Investors with cash are making their way to the front of the line. In the long run this is healthy for the market. It will prevent price inflation based on excess demand (the supply of buyers and "easy money" has contracted). Furthermore, it forces investors to be smarter with leveraging decisions, take less risk and focus on the fundamentals of the market.
For those currently hunting properties, be prepared to alter your leverage strategy for the time being. And, check with your lender for the absolute latest information on loan terms and qualification requirements. The loan market remains volatile and things can change quickly. What you were told last week may not apply today.
4 comments:
Thank god, we need a correction around here. Too many outside speculators have ruined the market here lately(thanks deaton) If you aren't buying at a BIG discount, good luck. You are buying just after the biggest real estate boom in history, like I said, good luck!
Actually, you would be surprised. The out-of-towners that do come calling for 10 caps rarely get a hold of any property. Those that do buy here from other places are sacrificing cap rates for a foothold in the market. Outside speculators don't buy Inside the Beltline.
I'm not sure how outside investors seeking Triangle properties can have a direct impact on what Wells Fargo, SunTrust or Bank of America decides to do with their underwriting requirements.
Finally, yes, we do need a correction. While momentarily uncomfortable, this is healthy for the market.
Buy to let property Investors can expect two different types of return when planning investment property; income and/or growth. If investing for growth or capital gains, investors generally take a longer term view rather than needing more immediate access to capital. During your investing days, your priorities may change depending on your salary and other sources of income. It is likely that you will require income from your investments more so later in life as you work less and less. Planning for income, growth, or a combination of the two, often stems from your tax position, your immediate requirements for cash, and your longer-term plans. Many people construct a property portfolio of investments which offer a combination of income now and future growth.
Agree 100% Raj. A combination of the two approaches is very solid way to build wealth through real estate. Some choose to simply work with appreciation-type properties, opting to feed a property a bit for the first few years. Those shooting for just cash flow tend to end up confused about the long-term picture. Simply put, there are several ways to invest in real estate.
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