I am seeing more and more of the type of borrower who has poor credit, recent bankruptcies, late pays, and charge offs attempting to purchase their first home. In the old days, I would counsel these prospects on credit repair and establishing good credit histories, waiting until they improved their histories to satisfy the requirements of the FHA underwriter.
Recently, many of us were able to put these kind of profiled clients through various subprime lender programs, even at ZERO DOWN. The withdrawal of the investors into this type of client has generated what I see now as the opportunistic investor client who is looking for positive cash flow as a result of reduced prices, low rates, and steady rental rates.
My Realtor Strategic Partners and I are seeing more inquiries on recent short sales, foreclosures, and quick sales from investors looking for rental income, or lease with options as the declining market values has hit our area. Most of my marketing efforts has now been concentrated on the following target audiences who see this current market as one that is ideal for the rental and rehab market.
1. I am targeting the non owner , first time investor who is pulling their money from the stock market and wantng to place it in an income producing real estate venture. Their Internal Rates of Return are higher than average as these projects are closed at lower prices combined with a favorable interest rate. On the down side, we are seeing more capital investment requirements for down payment, resulting in fewer but better projects. In past times we have seen more of that capital having to be spent on repairs, which don't seem as intensive as they once were. Many of these investments were project homes themselves until the orignal owners went under water. I am seeing more infrastructure and deferred maintenance improvements on many of these sought after homes.
2. Targeting the move up buyer who is buying a project house that needs extensive repairs and most likely a bank owned property, leaving little in the way of negotiated repairs. The Streamline 203-k, along with other like minded programs are offering nice packages and rates to offer acquisition financing along with the escrow for the repairs and improvements. Most do not have the funds to cover the cost of both, and are willing to take on this type of financing to avoid tapping into reserves and 401-k's as their porfolios are stil soaring.
I think the market, although more restrictive in entry with higher FICO scores, more down payment, and conservative underwriting standards will limit the number of borrowers entering this market, but the quality of the buyer will go up tremendously, and I believe be successful in meeting their investment expectations.
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