The Idiot Theory - Idiots that make the laws will enact new bills and legislation but rarely do they fix the problems they attempt to solve. You have to love how politicians predictably pander to the ‘crisis’ at hand. They are like a ‘2 Bit Whore’ jumping on any bandwagon that might get them votes so they can stay in office with their fat paydays for no work.
The mortgage crisis is their latest pet project. New bills are being drafted to protect tenants from foreclosure.
The problem: Landlords are collecting rent up until the foreclosure. The tenant is often unaware or being lied to by the landlord or property management. Foreclosure happens and the Sheriff comes by to throw them out. There is an easy solution for the tenants but the idiots will not figure it out.
Solution: Change the laws to require a landlord give a '30 day notice due to foreclosure' to the tenant. It’s simple and the same notice to move tenants receive in most instances anyway.
But that’s not what the legislatures are doing. They are creating new legislation that may require foreclosing lender to give the tenant up to 6 months to find a new place to rent. Absolutely insane!
I know that no matter how grim things look with new laws and legislation there is always a gold lining filled with opportunity for people if they take the time to look.
This one is just too easy. If this bill or any like it go into effect mandating the tenant has time to stay in the property after a foreclosure to find a new abode it will be a huge for investors. Legislation like this will force the foreclosing party (the lender) into becoming landlords.
This creates massive problems for lenders because it forces them into property management. Who is going to collect rents? Who is going to do the repairs? What about the security deposit? How do they get a copy of the existing lease? How does this affect their yields? How does this affect their REO and lending ratios?
The lenders will have to contract property managers which does not sound too hard until you think about how many properties and take into consideration the varying locations of those properties.
Let’s say the lender has one property in Timbuck Two. The lender has to invest the man hours to find and contract a property manager. Multiply this time 500, 1000, or 10,000 properties and you have a logistics nightmare.
To make matters worse the lenders will incur increased losses. Assume a property had a payment of $3000 per month from the owner and most of this was interest/profit payable to the lender. Assume the rent on the property is $1000 monthly. (These numbers are realistic in many parts of the country) The lender is losing $2,000 monthly or over 6 months $12,000.
Now a few of you are saying, “But Gerald, the lender is not losing $2,000 monthly because they now own the house free and clear since there is no loan. The lender is actually making $1,000 per month.”
A fair argument. However, if the lender has the ability to loan out their money and get $3,000 per month and are now forced to get $1,000 per month on the same money they are literally earning $2,000 less per month. They may not have a $2,000 loss per month but they have a $2,000 reduction in gross income per month giving them the same net effect.
Assume the lender has 1000 properties; that’s a $2,000,000 monthly problem before you even get into property management expenses.
HUGE OPPORTUNITY
If legislation forces lenders to become landlords it will do two things. 1) Increase lenders desire to avoid foreclosures which translates to more short sales at bigger discounts and 2) Increase discounts on REO Properties.
The discounts must be given because the new investor has to deal with tenants and could be forced into holding the property 6 months before they can pursue their plans for the property.
The opportunities in foreclosures are unprecedented. If you are not in short sales either you are making too much money doing other things or you have no legitimate excuse. With my short sale system you crank out short sales packages in 5 minutes then let the packages and follow up faxes do the work for you. It doesn't get any easier.
I’ll also be covering short sale secrets February 29-March 2 at my 14 Person Private Seminar on Wealth Explosion and Asset Protection. Only 14 people will be accepted and you will leave with all of your asset protection and estate planning entities in your hands AND with an understanding on how to use them! The wealth explosion will blow you away with how to get 42% guaranteed returns and so much more. This will be an intimate and intense private seminar unlike anything you’ve ever experienced. Three full days with me and one of the best asset protection attorneys in the country.
Now Go Buy A House!
PS – The private seminar on wealth explosion and asset protection is something you should seriously consider. With only 14 people we're going to cover things in depth in a way that can't be done at a 100 person boot camp. If you paid a competent attorney to just create the entities it would cost you over $25,000! We're not giving you forms, we're creating the entities you need and teaching you what to do and how to do it because only when you understand what your doing and why do you have asset protection. It's a huge difference.
