Yeah, many will lose their property and the investors will win while banks lose. But the media does get it wrong "A LOT" and Real Estate isn't in as much trouble as they say. It is still the best investment. I have a friend that uses a negative am loan on investment property and it makes sense for him. He pays an extra $6,000/yr but the property appreciates $50,000/yr and his cashflow is still $800/month. But it only works in an appreciating market.

how do you get the owner caught up with back payments? do you partner up with them and use your own cash to make it up then sell it? do u take it subject to?

what if they have little to no equity at all? [/QUOTE]

I just provide them with a hard money HELOC up to 80% LTV. That brings the mortgage current and gives them time to sell on their own terms. If they dont have enough equity there nothing I can do.

I think a lot of the so called stated income loans will be in trouble. Most people "over" state their income and will be in deep trouble when many of the stated arm loans adjust.

And for those banks and brokers that encourage overstated income loans they'll get pulled in.

More likely you will see some serious refinancing!

What will they refinance into? Another stated loan at a higher rate which will increase debt to income? Most people get stated loan bcause they can't get conventional financing. At today's rate, refinancing is going to cost when DTI is added.

Well they are gambling on the hope that their property has appreciated enough to give them a lower rate due to a lower loan to value.

If you purchase with 100% financing with 6.25% on the first and 9.9% on the second, you have a 'blended rate' of 6.9%. If you can refi both into one loan at 80% LTV at 6.1%, obviously your payment will be reduced.

I do that for ppl all the time. If your property hasnt appreciated enough to do that, you better pick up a few extra shifts at work.

Yes, overpaid and overmortgaged has been the fare of late. I own a property management company in Seattle where many prospective clients land on my doorstep wondering why their investments aren't making sense. I take one look at the financials and bingo . . . your debt service is 98% of your revenues. And that's at 100% occupancy!

Where the heck were their agent's and lender's heads when they were putting these deals together. It's no wonder some real estate agents make a bad name for all of us.

I have to tell some of these folks 'you can't afford my fee' (which is very competitive). You also can't afford utilities, insurance, maintenance, or heaven forbid, a vacancy.

It's going to be a very bumpy road for a lot of people in the next few years. God help them.

Cate

I regularly receive lists of owners in default. I'd be interested in seeing more. Though selling these types of properties could be lucrative, I do feel compassion for the owners who were misinformed.

Stated loans = liar loans

Stated loans = fraud loans

been reading up on the mortgage industry and it gives me the shivers reading articles on people overstating their income and providing false CPA letters, etc. saavy realtors and investors are out there to clean up the mess when they preforeclose.

I just provide them with a hard money HELOC up to 80% LTV. That brings the mortgage current and gives them time to sell on their own terms. If they dont have enough equity there nothing I can do. [/QUOTE]

what are your points and rate for hard money heloc? also can you base the hard money on the 'after repair value'? wheres your collateral?

sorry im still learning the ropes on how to utilize hard money lenders

i know exactly what youre talking about.

right. that makes sense. ive read that its stupid to do a leaseback with the original owner after taking over the deed. so basically if i were to setup a land trust agreement, put the property into the land trust like "smith family trust", to prevent the DOS, investor becomes the trustee, take over the property subject to, the beneficiary will be the investor/LLC after the owner transfers his rights through quit claim. then implement your exit strategy to flip or lease.

in CA, i would mainly look for buying below market value, no positive cash flow in the middle, and a nice big nesting egg at resale. if we buy below market value and the interest rates were to suddenly jump, we can dump/sell the property without taking a major financial loss.

outside CA, i would focus more on a larger spread in the cashflow, large/medium profits in downpayments/deposits and small profits on the back end due to low appreciation.

When doing a hard money 2nd, rates are anywhere between 14% and 16% depending on the strength of the borrower. Thats strictly for someone in foreclosure tho. If you are asking about ARV, thats a entirely different deal.

Interesting Realty Check. Alvin and I were talking about someone doing the leaseback.

Thanks for sharing!

greg- there is no way to FIX the problem. bottom line....these loans are very profitable. yes, the margins have been cut over the last year, but the lenders seem to get even more creative.

most of the issues we face is due to lack of education. both with the borrower and lender.

let me ask this....husband and wife, sub-prime credit. they go by a new car....terms- 7.5 year 19% interest rate....$2500 down! on a depreciating asset. i see a hundred of these a month....but thats ok?

.....but if it's a 100% purchase, 6% seller concessions, no money out of pocket other then a years worth of homeowners insurance and an appraisal.......much less than the car cost!.....and they freak out at the 8.5% rate. amazing

it's all about education. americans are addicted to credit car debt and the $700 a month car payment. Much more dangerous than a 2/28 sold to a young couple. i am not sayin it's right.............i am just sayin.

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James Keely
Florida Mutual Mortgage
Dir. Of Opertions
800-899-6198
http://www.zerodownflorida.com