Has the time come for Legislation? - Posted by Jane M
Posted by Jane M on October 07, 2004 at 08:32:25:
This was posted on our local REI message board:
Has the time come for Legislation?
By: Lisa Moren
There is a move a foot to create legislation that may negatively impact real estate investing as we know it today. It is hard to say at this point, what that impact maybe, but we need to be aware of what is happening in our community, on a state and on a federal level. I have listed some issues that could be potential warning signals that could have an impact on real estate investing as an industry.
Rehabbing & Flipping Properties
All of us have read articles regarding flipping property or rehabbing and the longer seasoning requirements that are occurring in the marketplace. Simultaneous closings have become a thing of the past. Most institutional lenders want to see at least three months of seasoning before they will fund a loan.
Over Inflated Prices
Have you read the stories about how investors pay $25,000 for a property? The rehabber invests $15,000 in fix up costs and then turns around and sells the property for $90,000? The media has had a ?hey day? reporting these issues. Real Estate Investment as we know it could see a dramatic change in the near future.
Some investors make a living rehabbing and flipping. They bought right, fixed the property up, got it appraised by a reputable local appraiser and sold it at fair market value.
Like any industry there are those that do take advantage of the system. They get a ?made as instructed appraisal? for example. Or sell to individuals who would never have been able to qualify, let alone afford the home they were put into. That number is few in comparison to the true investor who operates their enterprise from a businessman?s perspective.
I have many friends who help first time home buyers get into their homes on a property they rehabbed and sold to buyers who qualify for a FHA loan What about these professional investors who are helping a public attain the American Dream?
Would legislation help? Do we, as real estate investors need a lobby to protect us?
I think it is safe to say that real estate investing as recently as just a few years ago is not the same as it is today. There are changes underway. If we don?t get involved this could have a negative impact not just on our business, but on other related businesses that make their living off of working with us as real estate investors.
There is a grass roots movement investigating such an association that would protect the real estate investor from issues like the ones I described. Do you think we, as real estate investors should ban together for the common good, or should we wait and see what the government will do to impact our investments and our future?
Generally, I do not endorse associations. But I have been asking my self lately, if things change tomorrow, real estate as an investment may not make as much sense. Investors getting taxed for being landlords, rehabbers going out of business because they lost their profits by being forced to hold property longer then they can afford to. Investors being told they are limited to X % profit on their resale. If this happens than where are we?
Are we better off investing in treasuries, or having our money under our mattress? No one has a crystal ball to know what will happen in the future. I hope this article will offer conversation and debate not just for us as individual real estate investors, but for our community of local, state, and national real estate investment associations.
The question comes down to: Do we want or need a professional association to protect the rehabber and the real estate investor who buys properties with the intent of flipping or turning them over quickly? Will what happens to these investors have an impact on the entire real estate investing community? Where do we go from here? It is up to us to decide.
Lisa Moren has been a real estate investor since 1978. She is the marketing advisor to the National Real Estate Investors Association.