In 2008, the year of the big crash, there were 5 million rental properties foreclosed on. They became the property of the banks and mortgage companies and were called REOs (real estate owned). They were sold primarily to investors rather than consumers who were going to live in the house.
Why were these investors who didn’t have real estate backgrounds putting so much money into real estate? It was an alternative to traditional stocks and bonds which also took a terrible hit. (Financial planners started calling them “alts” around 2008.)
Now fast forward. Today in 2020 there are 18 million more rental houses than there were 10 years earlier in 2010. Naturally, that also means we have millions more landlords than we had 10 years ago. But, even though landlords may have a higher tolerance than I do for midnight calls to fix a leaky toilet, they have a low tolerance for tenants who don’t pay their rent. As they watch their incomes and property values plummet, they may not be committed to hold on to their properties until things turn back up.
This situation will provide tons of fresh inventory thanks to the massive number of landlords who will want out of their rental properties. It’s a huge opportunity for note investors who understand creative financing. You’ll be able to buy these properties and let the current owner finance their equity to you.
OR, these landlords may move their money out of rental properties and into the note space by seller financing them to qualified buyers.
After the COVID situation, the country is sitting on more dry cash than we’ve ever seen in the history of the United States. People are now bringing their uninvested dry cash into their self-directed IRAs at a rate no one has ever seen before.
It creates a pool of private investors who will be eager to fund your note deals. They want a safe place to put their money without demanding a high return. They just want to be confident of getting their money back with some return.
All indicators are telling us the real estate business is going into a lights out situation. Start now to nurture burnt out landlords who are not as enamored with their rentals as when they bought them.
Note investors get to be the problem solvers again!