Hello to all who may stumble on this blog for better or for worse. In any case I welcome you to my new - and first ever - blog. This blog will attempt to chronicle the activities, successes and trials & tribulations of BPS Property Solutions, LLC. I will also mix in some personal perspective on life in Michigan and life in general. I hope you find my ramblings to be insightful, informative, challenging and, periodically, humorous. Actually, I just hope you find them.
At times I'll plug my business or some business partners that I believe add value to their respective fields. I'll also rant about people or businesses (not specifically, of course - I don't need to know any more about the laws surrounding libel!) that are less than desirable. So, be prepared for the occasional sales pitch - hey, at least I was upfront about it and didn't try to use subliminal advertising and brainwashing. BPS Property Solutions, LLC is great!!!!!!!
The Sky is Falling! The Sky is Falling! And the real estate market is falling with it. This is one of, if not THE "worst" real estate markets in Michigan history. The number of houses on the market is swelling monthly, daily in many areas. Foreclosures are at record levels and growing. New companies are letting workers go or shuttering their operations every day. The security of a "Big 3" job is far from secure. Bad things are happening to good people. Everywhere you look there are signs of economic disaster. These are indisputable facts and the sad realities of life in Michigan during 2007. Sadly, the reality will be much the same in 2008. There are billions yes billions with a B of adjustable rate mortgages scheduled to reset in 2008. What does that mean? More people will likely lose their homes in 2008 than in 2007, unless there is some government action.
Here's the contrarian view - and I'm prepared for the repercussions from what I'm about to say. This is one of, if not THE BEST, real estate markets in Michigan history. There is an entire industry dedicated to investing in real estate. As with any investment, the objective in real estate investing is to buy low. Whether the strategy is to sell for an immediate profit or hold for long-term appreciation or manage as a rental, the object is to buy low. First time homebuyers are also in a great position - they have never had as much choice or power as they have today. If they can get financing.
While it may seem on the surface that investors are "taking advantage" of people in bad situations, the reality is that scrupulous and honest investors are helping people out of a bad situation in many cases. Investors today are focusing on "Bank Owned" property also known as REO's, short for Real Estate Owned. This property has already been through the foreclosure process and is back in the possession of the bank. The former owners have moved on and the bank, through the sheriff sale process, has taken the property back into its possession and is now selling the house through conventional sales techniques, (i.e. realtors). Anyone can buy a foreclosed home - there's no magic to it. Investors know that banks are typically willing to sell these properties at discounted prices just to move them. At this point, the damage has been done to the former owner's credit and they've moved on. The investor didn't cause this. I'm not putting blame on the former owners, either (many of them were misled or coerced into their unaffordable mortgages by unscrupulous mortgage brokers and loan officers).
So, investors are buying these bank owned houses by the hundreds or thousands. So what? I said above that investors are helping - but how? People that have had the terrible and sad experience of being foreclosed on cannot qualify for a mortgage immediately. They also need a place to live. Where do they turn for housing? Renting. Who do they rent from? Investors. Investors are able to buy property so inexpensively now that they can rent these houses at very affordable rates to people who need good, solid, safe homes.
There is another phenomenon occurring - it's not new, it's just gaining widespread acceptance. Lease options, or rent-to-own as it used to be called, is the rage today. In a lease option, the buyer buys direct from the seller (investor) and does not need bank financing in order to move in. The buyer and seller enter into a typical rental agreement for a period of time. They also enter into an option agreement that allows the tenant/buyer to purchase the house from the seller/investor at a future date for a price determined in advance. The tenant/buyer gives the seller a small option fee to secure their right to purchase the property in the future. This fee is negotiable and is normally smaller than any straight purchase down payment. The fee is credited toward the purchase price if the tenant/buyer exercises the purchase option, but is forfeited if the option is not exercised. If structured properly, the investor can sell to the buyer at a profit while many times allowing the buyer to get a discount from market value and have immediate equity in the home. It's a win-win situation.
This is a terrific opportunity for someone with bruised credit to have the chance to own a home again. There are drawbacks, of course. The prospective buyer must be able to finance the purchase when the option period expires or the purchase never happens. In many cases the prospective buyer must complete a credit repair program and make all debt payments - not just rent - on time to be able to qualify for a mortgage when the time comes to exercise the option and avoid forfeiting their option fee.
As sad as it is, I have to mention that not all real estate investors are interested in win-win situations. They are interested in WIN situations and you can guess who the winner is. Not the tenant buyer in case you dozed off for a minute. There are investors out there that will steal equity from unsuspecting private sellers and turn them onto the street without blinking. They'll structure lease options that have no chance of performing just to keep the option fee and do it all over to someone else using the same house. They will inflate appraisals and manipulate comparative sales. They'll pressure people with nowhere else to turn into taking their deals. They'd steal from their children given the chance. BPS Property Solutions, LLC prides itself on integrity. What is integrity? Doing the right thing. All the time. No matter what.
Here's the first plug - we are proud members of the Real Estate Investors Association of Macomb (REIA of Macomb). This is a real estate investor group (hence the name) dedicated to honest real estate investing done with integrity. The group's members share ideas, strategies, resources and support in an effort to be successful entrepreneurs. Check out this link to see Michigan's Premier Real Estate Investors Association.
Well, I'm worn out from this first entry - and I imagine you are too if you've stayed with me this long.
Until next time - Make It Happen!! (whatever "IT" is in your life)
