Tom Luxsox Coins

Dollar Tougher

Make Money With Apartment Foreclosures

Foreclosures aren't just affecting single family residents. The same economic factors that are driving record foreclosures in single family residences are also driving record foreclosures in apartment buildings as well.
What this means to you as an investor is that you have an unprecedented opportunity to take advantage of a huge trend in the marketplace. Plus, since there are less investors that deal with apartments than single family homes you have less competition as well.
The real estate crisis affects all types of real estate, both residential and commercial. The reason why is because these are unique trends that are impacting the entire industry

There are three trends that are driving the declining of prices in all aspects of real estate, including apartment houses as well as the record numbers of foreclosures. They are…
1. Depreciating Property Values
2. Tougher Lending Requirements
3. Short Term Financing Becoming Due
As properties decrease in value, many property owners find themselves in difficult positions. They lack the capital necessary to make repairs on their buildings. Some of them may even be facing violations and tenant complaints.
At the same time, because the prices of real estate are going down, these owners don't have enough equity in their buildings to be able to refinance the property. As a result, they cannot borrow the money necessary to get the building in the necessary condition.
Even if the equity is there, this leads us to the 2nd challenge, tougher lending requirements. Banks and lending institutions are requiring higher credit scores, more income and more requirements in order to make a loan.
If the landlord doesn't meet these requirements, he or she is unable to get approved for a loan even if there is enough equity in the building to make the necessary repairs.
In addition to this, some landlords HAVE to refinance their buildings because their mortgage is coming due because they took short term financing. If they are unable to find a lender that will refinance them at favorable terms, they run a risk on defaulting on the loan.
This is because many of these short term loans have balloon payments. This means the borrower makes monthly payments for a period of time (i.e. 5 years) and then has to pay the entire balance of the loan at the end of the term.

So what does this mean for you as an investor? What it means is if you understand the challenges and are armed with the knowledge and skills to address the challenges, you have an opportunity to create substantial wealth in real estate over the next 12-24 months.
In addition to this, there are certain dynamics with apartment houses that make both the property owners as well as the lenders of these loans even more motivated to deal than their respective counterparts in the residential market.
Most residential single family homes are owner occupied homes. What this means is that the homeowner also lives in the property.
Many homeowners develop a sense of attachment to their properties. After all, many of them have saved up for years to be able to purchase their first home. When this type of homeowner goes into foreclosure, often they can be very impractical about the situation.
Apartment building owners usually live somewhere else other than the building that they own. They don't have the same levels of attachments that a typical homeowner who lives in their home might have.
Also, if a homeowner has the money to make mortgage payments, he or she will often continue to do so even if the property is worth less than what it is worth. If they like the neighborhood that they live in, they can always keep the property and wait for prices to come back.
An apartment building owner cannot afford to continue to make mortgage payments on a property that is not worth what the loan is worth. Chances are, if they are in that situation, the amount of money they are receiving in rent is less than their expenses and they are losing money every month.
Finally, most owner occupied single family properties are financed by 30 year mortgages. They don't have to refinance these loans and can just continue making mortgage payments if they have the money to do so.
Many apartment buildings are financed with 5 year loans. These loans are becoming due and they have to refinance during a tough lending environment. If they cannot refinance (and many of them cannot because the value is not there to meet the tougher lending requirements) their properties will automatically go into foreclosure.
So how do you make money on these apartment buildings? You do it using many of the same strategies that you would use with single family residential properties. The only difference is that you are dealing with larger numbers.
For example, one of the strategies that we teach is to set up your own company offering foreclosure assistance services. You offer to negotiate with the lending institution on behalf of the property owner to see if you can work out some type of agreement such as a forbearance plan or loan modification.
You can offer the same services for apartment building owners. Often, you can charge higher fees than you would charge residential property owners. These owners also typically have the cash to pay your fee, they just don't have the hundreds of thousands of dollars that would be required if they have to refinance a 5 year loan coming due with an undervalued apartment building.
Lending institutions are also willing to entertain a short sale on these properties. If the costs of foreclosing on a single family are so high that they would rather discount these properties, imagine the costs required to foreclose on an apartment house with dozens or even hundreds of units?
So consider apartment house foreclosures as part of your overall investment strategy.

About the Author

Mike Warren is a real estate expert and trainer. To get some of Mike's Free CD's, reports,videos, courses and more please visit our website at http://misuniversity.com.

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