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Carver Communications - Index

Carver Communications - dec12008 - Index

By Jack Shull
Single Family Investment Properties;
a great investment at this time…..but
Where is a person to place their liquid
assets these days? The stock market
gyrations have spooked investors all over
the world. Many have seen their portfolio
drop 20-30% in a matter of a few weeks
and who knows but the Big Board (Dow
Jones) and the S & P 500 stocks as well as
the other markets may have more room to
fall. Bond prices are darting more quickly
than ever and are actually acting much
like stocks these days. Money market
rates are dropping as quickly as the Fed is
lowering short-term rates and these are not
hedges against inflation. So, where is one
to invest their monies these days?
How about single-family properties
for investment? Why not? With the supply
of for-sale properties increasing you
can purchase at a good price. Rents have
been holding up well and “in some pockets
of town rents are actually rising a bit,”
according to Thom Perdue of ReMax
Preferred Realtors. Stocks may vanish
but you can always see and touch a house
said one investor I spoke to recently.
Oops, not so fast.
Three recent changes in credit
requirements in September and October of
2008 have made purchasing and financing
rental properties more of a challenge these
days:
In September 2008, Fannie Mae and
Freddie Mac limited the total number of
financed properties to four for investors
attempting to purchase additional investment
properties. In past years, Fannie Mae
and Freddie Mac would allow an investor a
total of ten financed properties. Thus
today, an investor who owns a homestead
that is mortgaged, may now only own three
additional mortgaged investment properties
for a total of four mortgaged properties.
Although some local credit unions
may exceed the four financed property
limit, the rate would be much higher and
the loan terms would include a shorter term
December 1, 2008 REAL ESTATE NEWSLINE 35
and possibly would include a balloon payment.
On October 1, 2008 a new fee was
charged to purchasers of investment properties.
Previously the charge was 1.5% to
the discount (or 1.5% deducted from the
premium) which added roughly .375% -
.50% to the interest rate. The new charge
is 3.0%. This will now add roughly .75%
- 1.00% to the interest rate.
On October 15, 2008 the last mortgage
insurance company who had allowed
mortgage insurance on investment properties
up to a loan-to-value of 90% discontinued
this offering. Thus all investment
loans now are capped at a maximum loanto-value
of 80%.
These changes are disappointing to
me, but the agency rules are the rules that
we lenders must abide by. I can only surmise
that such dramatic rule changes were
enacted since many owners of investment
properties have become delinquent in
much larger numbers than they have been
in the past. Still, I wonder how many of
these investors were unsophisticated,
jumping on the bandwagon in a new
investment vehicle and who may have purchased
numerous properties using the
Stated Income / Stated Asset approach in
garnering loans that were commonplace
from 2003-2006. I further wonder how
many of these loans were financed at a
95% or higher loan-to-values which in turn
would have caused the interest rates on the
loans and the corresponding payments to
be so large that earning a positive cash flow
on the properties would have been almost
futile.
Regardless, investment real estate is
a still a great investment should you or
your client find a good buy. And, there
will be some good buys available. Invest
in America.
Nearly 200 Dominion
residents enjoyed the 2
performances by the
San Antonio Tenors, (l-r)
Don Braswell, Billy
Chapman (William)
and Tim Birt, benefiting
Wings and sponsored
by Compass Bank and
hosted by Burdick
Custom Homes. Kuper
Realtors and Dominion
residents, Dave and
Linda Kirk, were front
and center for the
show.