The expected return to vogue of owner financing As you know, the real estate market works like any economic product...
The expected return to the fashion of owner financing
The real estate market is known to operate like any economic product in high and low volatility.
But unlike the stock market where the fluctuations are very fast, the real estate market is relatively slow, which allows investors more time to react to trend changes.
The US real estate market up to the current corona crisis has been experiencing increases for 8 consecutive years, starting in 2012.
But any final rise to its end. The reasons for ending the tide period change every time but the same result. The upward trend is halted, the market has entered a period of stagnation (this is the case at the moment) and then starts to decline quite often.
The corona crisis that caused millions of Americans to lose their jobs is already affecting the residential real estate market and stopped the trend of increases and is expected to continue to affect significant price decreases in the future at least for the next year and even more.
The market is currently on standby and many sellers are sitting on the fence as it is difficult for them to sell the homes at a price they could only get a month ago.
Some sellers who sit on the fence and want to sell but do not lower prices are expected to have to return the property to them for sale in the market and settle for a price drop in order to sell.
Investors who have leveraged their mortgage investment and their tenant does not pay for twenty-four months and another month will get into a difficult position that will force some of them to "get rid" of their assets that have become liabilities and a huge discount before the banks take it from them.
At the same time, the banks will experience many loans that will not meet their monthly payments and start operating the asset collection process. The phenomenon of increase in asset collections by the banks will intensify but will take time until we see it at full strength.
We can only expect to see its full power for about a year. That it will happen and if it happens at high mass the market will experience a significant decline.
What is already clear is that we are in the process of moving from a sellers market to a buyers market.
ZA that anyone who owns a property will try to woo a potential buyer and offer him his home at a very discounted price. The sellers in such a market will come towards the buyers and do everything to please them.
Many opportunities are expected, especially for those who have prepared themselves for a crisis and a cash back (his or her investors).
In the market of buyers, owner financing is back in vogue.
At times when it is difficult to sell cash the sellers will be much more open to selling the assets when they finance most of the purchase for the buyer.
As investors looking to expand their acquisitions this period is likely to be fascinating and full of opportunities.
I, who own an owner financing business and invest in real estate in the USA, felt strongly the transition of the market from a buyer's market to a seller's market, which made the business of financing very difficult and actually caused me to change my strategy in the last two years mainly.
The business is located in Memphis, Tennessee. Over the past 6 years, I have bought many private homes there and sold them to homeowners and investors with owner financing and thus in effect become a bank whose income is the mortgage payments that I pay every month for home buyers.
Like any lender throughout the period, I had borrowers who did not pay and had to take the house back from them.
If in 2014-2018 any such house that came back to me simply sold it again with owner financing then it began from the end of 2018 I found that the Memphis market has warmed meaning and that owner financing has become less attractive.
On the one hand, I had more and more difficulty in acquiring assets at a significant discount from their market marketer - that is, it became increasingly difficult to acquire assets that met my criteria - buying a property for up to 60% of its market value maximum.
On the other hand, every property that I received back after the borrower did not pay, I discovered that I could very easily sell it at full market price (retail price) and in cash to an investor instead of selling with a 10-year loan that I would give to the buyer.
I started selling every property I got back to turnkey investors after a light renovation and renting out the property.
But now everything is likely to change.
Once again, you and I will have many opportunities to buy properties at a discount, rent them or sell them with owner financing (in fact and also - depending on the nature of the property).
The interesting thing is that before the Corona crisis broke out and I was about to open another course in creative financial methods for buying and selling real estate in the US I thought I must make further sweeping changes to the course and introduce more bank financing content at the expense of owner financing.
Now everything has changed again and owner financing is expected to return to being more attractive than ever. Less bank financing - it will be increasingly difficult, especially for Israeli investors, to get a mortgage in the United States.
But again, it will be relatively easy to purchase houses for $15,000-20,000 in markets like Memphis-Tennessee, Birmingham, Alabama, etc. and sell them to homeowners for $50,000 and with a mortgage of $47,000 (only $3,000 as a down payment).
Assuming I gave a 12-year loan with a 9 percent annual interest rate.
Each such transaction will yield a return of about 45 percent per year, which means a return on investment after two years and then another 10 years of receiving mortgage payments after we have returned the entire investment!!!
The current has changed direction, you need to shift the direction of your investment liner accordingly - if you do so now you will be successful in the next period.
Good luck to everyone and you are welcome to contact us with any questions you may have from this post and in general.
Yours, Shai Halevy
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