With today's historically low interest rates coupled with a glut of foreclosed properties that can be picked well below market value, one would think today would be a great time to be a real estate investor. The old adage of "buy low and sell high" is tailored made for today's market but the bubble is about to burst with a recent announcement by Freddie Mac.
August 1st Freddie Mac revised its requirements for investment property mortgages that will negatively impact the real estate investor community. With these new revisions real estate investors will be limited to a maximum of four mortgages on 1-4 unit investment properties. The previous limit was 10.
Why should investors care about a change made by Freddie Mac? Freddie Mac and its sister organization Fannie Mae underwrite almost 50% of conforming mortgages on the secondary market in the United States. Freddie Mac's impact on the lending market is so great that if it sneezes, the entire industry catches a cold.
If Freddie Mac makes a change in the lending requirements then you can bet that Fannie Mae will follow soon thereafter. Many lenders have already implemented these changes in their lending practice well ahead of the August 1st date. These changes do not bode well for the real estate investor community.
With the recent tightening of the credit market followed by these changes by Freddie Mac it is becoming a difficult time for real estate investors. Savvy investors are salivating at the opportunities in the marketplace that allow them to purchase properties in some cases up to 50% less than their value just a few years ago. Starting August 1st these opportunities will disappear as investors will be unable to get mortgage financing.
For investors like myself who already own more than four investment properties, we will no longer be able to get mortgages, and most of us will probably leave the real estate investment market. The only lending option available to us would be portfolio lenders.
Real estate investors may choose to just sit on their current inventory of investment properties and wait out the storm. Until the clouds clear these investors will not be able to even refinance their existing mortgages.
These changes will have a ripple effect in the real estate investment community. There will be a smaller pool of investors competing to purchase investment properties. Houses that are normally purchased by investors instead of owner-occupied buyers will languish longer on the market which will result in a decline in price.
The only silver lining with these changes are for all cash buyers. If you have money then you can almost name your price for investment properties since the pool of competitors will have all but dried up. Banks will be jumping at the opportunity to offload their non-performing assets at any price.
The changes by Freddie Mac appear to be punishing investors as if they were the sole culprits of the recent turmoil in the lending market. Investors will be forced to find alternative sources of financing or just be content with four investment properties.
There are many ways to make a fortune investing in real estate. For more information about real estate investing visit my website at InvestInRealEstate101.
For access to three of the greatest books every written on personal development visit Your Free Gifts.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น