A Perfect Time for Real Estate Note – ‘The Perfect Note Storm’

When someone tells me they’re an investor, I ask what type of investing they do, “buy and hold” or “fix and flip?”  If they say, “fix and flip”, I respond by saying, “Oh, so you’re NOT an investor, you have a job!”  Flipping homes is no different than selling homes, if you don’t get a sale, you don’t get paid!

When people ask what type of investing I do, I tell them, “I’m a cash flow investor because, call me crazy, but I like to be paid every month whether the market’s up or down and whether I work or not.

Many “fix & flip” investors who made a fortune buying, renovating, and reselling foreclosure properties during the Great Recession are now sidelined because they can’t find properties to buy at 70 cents on the dollar.  Their model doesn’t work well in a market with low supply and high demand.

I recently sat on an expert panel at our investor club consisting of five seasoned “flippers” who’d each renovated over 100 homes.  I asked the panel members whether they had ever offered financing to even one buyer who purchased their homes.  Not a single “flipper” had created a note for their buyer!

I said, “Buyers will pay a premium of at least a $10,000 for financing, so on the 100 homes you sold, you lost $1 Million Dollars of potential profit!  That money, at 8% interest, would be paying more than $88,000 per year for the next 30 years!”  You could have heard a pin drop…

As “fix & flippers” struggle to earn even a small profit with their power tools, cash flow investors are raking in record profits with nothing more than a pencil!

Ten years after the market meltdown, many homeowners still don’t have the equity required to sell. They’re tired of waiting to break even, tired of being trapped, and ready to move on with their life!  These homes can often be acquired for the value of the underlying loan, allowing investors to buy dozens of homes for the same down payment banks would require to purchase just one property.  Years from now, investors who adapt to the current market will fondly remember 2017 as “the good old days” when free houses were everywhere, like sea shells on the beach!

According to Ellie Mae, only 67% of those who applied for a mortgage last month were approved and 33% were turned down!  Buyers turned down by banks will pay a premium for homes with financing.

Many of these buyers are self-employed business owners, some of the hardest working people in America!  Their employees with W-2 income can usually qualify for a mortgage but the person who signs their paycheck can’t qualify!  Do you see anything wrong?  Who comes up with this stuff?

Let’s review:

1) Flipping homes and selling homes are jobs that require constant work

2) There’s a shortage of housing inventory (especially at low price points)

3) Sellers with no equity will give you their home (inventory) if you take over the pmts.

4) Banks are turning away 33% of loan applicants who apply for a mortgage

5) Buyers who can’t get a loan pay a premium price and have a large down pmt.

6) Being a “money collector” is in great demand, legal, ethical and you’re not doing it!

Original Article https://www.notecarry.com/the-perfect-storm-for-notes/

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