To me passive income is king; cash, not so much or for so long.

Dated: May 9 2021

Views: 234

To be clear, I do not believe a housing crash is imminent, however there are some factors that are pointing to a crisis coming perhaps by the end of this year. This crisis may not be for you and me, but it is real. Currently there are 2.1 million people that are 90 days or more behind on their mortgage payments. Additionally, there are 8.8 million people that are late on their rent.

The government is stalling this crisis  with both the Coronavirus Aid, Relief, and Economic Recovery (CARES) Act ( see the  The CARE Act) and by the CDC Eviction Moratorium. But the numbers of Americans effected are only getting larger.

When the moratorium and forbearance ends – as it must – these people have the following options:

The 2.1 million people that are late on their mortgages can:

1.       1. Stay and pay

2.       2. Short sell

3.       3. Walk away

4.       4. Refinance

5.       5. Offer Deed in Lieu of Foreclosure

6.       6. Get a loan Modification

 

Except for options 2, 4 and 5; the borrower must have income and good credit and if they had income and good credit perhaps they would not already be late on their mortgages.

 

The 8.8 million people that are late on their rent:

1.       Must pay in arrears and stay

2.       Vacate.

With very few exceptions these people that have either been foreclosed on or have been removed from their homes they owned will then be in the market without good credit and without funds to buy a home. In today's market we are low in inventory and prices are high. When the forbearance and the eviction moratorium is over, inventory will increase and prices will decrease.

{first_name}, there are no good solutions.

But what to do? It is beyond the scope of this newsletter to talk about what to do if you are one of the ones effected.  I can tell you what I am doing, however.

1.       building up a reserve in Bitcoin getting ready to buy more real estate within the next two years.

2.       searching for opportunistic buys in income producing property today.

3.       improving the rent on my rental property  by adding to them)

4.       increasing my income where possible

If you are going to buy real estate now, and I still suggest you do, buy in growth areas that people will flee to.  Look to the States like Florida that a have handled the COVID situation smartly. Look to rental property like single family homes and duplexes.  Keep your powder dry.  If you hold you “powder” in cash, it will be devaluing, so think appreciable liquid assets like  Bitcoin or Gold.

 

Want some good news? Cost of money will remain low, so if you can leverage now, do so, but don’t overextend yourself.

To me passive income is king; cash, not so much or for so long.

 

Blog author image

Gregg Fous

Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....

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To me passive income is king; cash, not so much or for so long.

To be clear, I do not believe a housing crash is imminent, however there are some factors that are pointing to a crisis coming perhaps by the end of this year. This crisis may not be for you and me,

Read More