Storm Clouds Gathering For Real Estate Investors

Storm Clouds Gathering For Real Estate Investors
Written By: Bryan Ellis
What does this have to do with real estate investing? A lot, actually. There are some big storms on the horizon that will effect all real estate investors - and without a bit of forward vision, the proverbial floods resulting from these storms could realistically overcome all of the planning, preparation and work you’re doing right now to be successful in real estate.

However, much of the storm is politically incorrect for me to discuss, because it requires that I take a definite position on some controversial issues and personalities. But because many of my valued readers consider me to be the real estate investing business’ equivalent of an “air traffic controller”, I think it’s best to face the controversy so you can avoid the storms that are laying in wait for you.

Here’s one big “storm cloud” that’s gathering right now:

•Significantly Increased Regulation Of Individual Real Estate Investors (Like You)… in its rush to place blame for the real estate market meltdown, the U.S. Congress and democrat President Barrack Obama are likely to propose and possibly pass new legislation that will severely curtail your rights as a creative real estate investor. In fact, this is already under way: Many states have already passed laws that make it virtually impossible to use the “Subject To” investment strategy, and the U.S. Congress is currently considering legislation that lays the groundwork for government regulation of the qualification terms for private owner financed real estate transactions. (This means the government could ultimately control whether a buyer qualifies for your owner financing, and you won’t have full discretion to make that decision for yourself.)
What do we do about this? For one, understand this: Your reaction to policy proposals must be judged based on the way those policies effect the United States generally and you specifically, and your judgments must not be based on the political party with whom the policy is affiliated, nor the particular politicans proposing the ideas, but on the merit (or lack thereof) of the proposal.

And in that vein, I give you this advice: With very few exceptions, new regulatory proposals from politicians are a bad idea. Nearly every law that is passed costs productive members of society (that’s me and you) both money and freedom. I don’t have enough of either… I’m guessing you don’t either. And the bigger the “benefit” the government promises with new regulation, the bigger the real cost will be to you and to me.

Here’s a quick example:

It’s entirely plausible to think that the government could institute “standards” for owner financed real estate transactions that are just as demanding as conventional mortgage transactions. The “justification” offered by the government would likely be that they are attempting to protect unsavvy borrowers from predatory lenders and therefore prevent another mortgage market meltdown. Sounds reasonable, doesn’t it?

The problem with that type of idea (despite it’s pleasant packaging) would be the following:

•There would be less competition for traditional mortgage lending - and since traditional mortgage lending is dominated by Fannie Mae and Freddie Mac (both of which are government-owned mortgage lenders), the legislation would effectively benefit the government at your expense
•The mortgage meltdown was spearheaded by poor management at Fannie Mae and Freddie Mac… and despite receiving massive bailouts from the government, both of those organizations continue to lose billions of dollars, thus displaying a clear inability to lead the mortgage market. Therefore, taking any action to further strengthen their domination of the mortgage market would be a terrible thing.
•Regulations do not prevent foolish consumers from making foolish decisions. The government knows this, and frankly, they don’t care. Their primary objective is to increase the power of government so that ultimately, private industry is functionally absent. And regulations such as the example described previously achieve this objective perfectly.
You may be tempted to think that I am behaving as a conspiracy theorist, but your superior mental acuity will prove otherwise. After all, did you ever suspect that General Motors would be a government-controlled business? Or that Bank of America would be effectively taken over by the U.S. Treasury? Yet both of those things have happened, and both occurrences are testimony to the extremely anti-business environment in which we live here in the United States.

In the future, we’ll talk more about specific circumstances faced by today’s serious real estate investor, and how to use our creative faculties to overcome the roadblocks placed in front of us. But for now, consider adopting this assumption: Additional interference from the government in my life or business will almost certainly cost me more money and freedom than any benefit they can deliver.