The big banks have stopped foreclosing, thus pulling millions of REO homes off the market. Many of these delinquent homes are turning to short sales or REO Rental programs. In the first scenario, banks work a deal with the borrower to sell the home, short of the outstanding loan balance. In the second, banks take homes back and then rent them to the former borrower or another tenant.
One of the things most folks neglected to consider was how the REO rental programs could and would be financed. This presents one of the largest hurdles.
Buying a home to rent means a different set of investment criteria than searching for a home to live in. If you will be looking for a place to live yourself, there is personal value attached to aspects of the home. Your happiness is an important factor, which can come at a price. When buying a rental property, however, it all comes down to dollar and cents. You will not be living there so you need to primarily consider your return on investment.
This week, Bank of America, one of the largest mortgage lenders in the US, announced that it was unrolling a pilot program aimed at helping their customers in default. In this pilot program, being offered to less than 1,000 homeowners, Bank of America will offer the defaulting homeowner a lease on their current home. Bank of America will retain ownership, but the homeowner will get to remain in the home.
Investing in real estate can be a daunting, even scary, task if you don’t know what you are doing. The risks involved with any investment, particularly real estate, must be clearly understood before deciding to invest. As with all investments, sometimes they are successful and go up in value, sometimes they are the opposite and lose value (as seen in recent history). With values and interest rates creating the perfect buying storm, now may be a great time to start investing in real estate.