Tuesday, October 8, 2013

ARE REAL ESTATE INVESTORS LEECHES?

I sometimes hear discouraging remarks that real estate investors are leeches and scammers. That they just suck off the misery of others. Let’s investigate the reality.

What is the definition of a leech? DICTIONARY.COM defines the word as such:

Leech:
1)    Any bloodsucking or carnivorous aquatic or terrestrial worm of the class Hirudinea, certain freshwater species of which were formerly much used in medicine for bloodletting.
2)    A person who clings to another for personal gain, especially without giving anything in return, and usually with the implication or effect of exhausting the other’s resources; parasite.

Now, I can hear the wheels turning in your brain:  Yeah! Yeah! That sounds like real estate investors! Sucking off the misery of the downtrodden. But wait a minute. Let’s look a little closer.

Leeches have gotten a bad rap. While they might have been used in excess (when it was not appropriate) in “the olden day”, leeches are still sparingly used in modern medicine thus producing a positive result for the one being leeched. The American Medical Association: Encyclopedia of Medicine tells us “Today, leeches are sometimes used to drain a hematoma (a collection of partially clotted blood) from a wound.”

Now, let’s look at definition #2 “A person who clings to another for personal gain, especially without giving anything in return…” Is this an accurate description of a real estate investor?

I look at an investor as a person or company that takes a non-performing asset, fixes it up and puts it back into service, thus creating value-added. In this process, the investor may very well help a family or individual resolve a very difficult situation resulting from death, divorce, job loss, or some other negative situation that can be turned into a positive one, or at the very least reduce the anxiety.

Yes, investors are looking for the person who is motivated. It is hard to convince a hoarder that she is not going to get the retail price of $300,000 for a house that is stacked to the ceiling with newspapers, empty medicine bottles and half used boxes of old cereal unless she HAS to sell. Then it might be possible to show her that although the surrounding comparables are selling for $300,000, she cannot expect that amount for the house because of its condition. The amount of expense and work that will be required to bring the house into useable condition requires a large discount on the sale price or exceptional terms, or both (i.e. owner carry back, or a loan subject to an existing loan). The purchaser/investor has to see the value in making the purchase or there is no sale. So I have to ask you, is it better to let the house go to auction or for the investor to work with the seller to get a reasonable price for the house so everyone can move forward.
  
Let’s face it that most people have a self-interest for almost everything they do. You don’t get up in the morning, put on your white shirt and dark pants and go to work at Joe’s Grocery because you like working at Joe’s Grocery. You go because you have a family, have bills and have to make a living. If you happen to enjoy your job at Joe’s Grocery that’s a plus, but that is not the motivator.

There are many reasons that a property might be available for an investor to purchase:

1)    Someone loses their job and moves out of their home and abandons it. Now it has become a REO (real estate owned by the bank). The house was upside down on the mortgage and the person could not sell it. Or the person was just too depressed to deal with the issue of fixing up and sell the house. The former owner might have benefited from a wrap-around sale to the investor.

2)    A relative who lives in Los Angeles inherits a house from an uncle in Detroit. The relative just wants to be out from under the burden of managing a house in another state and has no desire to move to Detroit. It is very possible the homeowner’s resources have already been exhausted and the person just needs to be rid of the house.

3)    A young family has to move grandma to a care facility or even in with them, but grandma was a hoarder and the family doesn't have the time, energy or finances to go to the destination and fix up the house to sell it. They want to sell it immediately and move on with getting grandma set up in her new place.

There are many, many other reasons that a seller might need to sell a house or property. The investor can act as a balm to the pain. This is often referred to as a win win situation. The seller is relieved of their burden, the investor gets a good deal and can make an income, and a new buyer can possibly get into a house that perhaps they could not have gotten into because they didn’t have the downpayment required on a standard bank loan. Everybody can benefit.

I just completed a teleconference call with a young lady named Linda who has four properties in Alabama. These properties will be going to auction to settle a probate dispute which has been going on for several years. One property is a mobile home park with about $2300 a month in income. The second property is the main house on the Gulf coast. The third property needs some repairs (also in Alabama). The fourth property is vacant land.

Anyone interested in information on these homes can contact Lindacanhelpyou@live.com Contact her immediately as the auction is coming up very quickly. Just let her know that you read about this here at: FLIPPING OR CRASHING IN REAL ESTATE.

The disputes have become contentious between the family members. Once the properties are sold and the funds distributed, the family can once again return to a state of normalcy. Whether all hurt feelings can be mended I have no idea. But here is a place where the family needs help to resolve the situation and a real estate investor can step in and help bring harmony back to the family.

In closing, I guess I just want to say that a real estate investor can be an asset, help resolve a sad or bad situation, and everyone can benefit.

For more information on homes in California, go to:

For real estate investment funding through COGO CAPITAL go to:
www.privatemoneyexchange.com/mspinvesting 

For tours around San Diego communities, you can visit:
http://www.youtube.com/user/mspinvesting

These are my websites. Thank you for reading.
Sara






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