If only the Politicians Listened to Anyone but Big Banks...

Small investors could lead the way out of a growing epidemic of empty, foreclosed and abandoned homes in many of the overbuilt bubble areas of the U.S., simply by buying, rehabbing and renting empty properties, contends California investor Bruce Norris.

At last, one man is making sense in a National forum!  Bruce is a longtime California Real Estate Investor who called the turn on the SFR Real Estate Bubble in California before almost anyone else. He made it to the big time in a nationally televised segment on ABC's Nightline. " Bargain Houses for Sale ". The result of a meeting and interview that lasted almost 3 hours is the short video at http://abcnews.go.com/video/playerindex?id=8188741 . You can see his website at www.thenorrisgroup.com . Hopefully, someone in Washington is listening to this eminently sensible man and his simple ideas.

The integrity and honesty of a man like Bruce Norris is palpable when you see him and listen to him in person. In short, Bruce knows that areas which were overbuilt and have many foreclosed or abandoned properties need small investors who will buy the properties "as-is" from asset managers and banks and invest in the necessary rehabbing that will make them viable as rentals in markets where buyers are scarce. Those small investors need larger investors to create sustainable financing for the rehabbed properties.

The end result is a win for all parties, a rebirth of neighborhoods with good rentals, support for flagging real estate values, competitive returns for small investors and good quality loans for investors and bankers willing to look at an idea whose time is here and now.

Many if not most of these homes have become eyesores and are contributing to the deterioration of neighborhoods and to local crime as well as putting downward pressure on the values of other homes in the neighborhood. Why in the world are politicians and bankers ignoring the possibility of supporting investors like Bruce and his students as they work to solve a problem that is still growing and without real relief in sight ?
 
Why are all the "Real" Solutions Still Being Ignored?
One of the available strategies for small investors to purchase these types of properties is through the use of "Self Directed Retirement Plans" which allow for the direct purchase of real estate, but there is little or no coverage of this strategy in the media.  Imagine if  50 million , no 5 Million, just 500 thousand IRA investors, supported by a GSE or private 30 year fixed, Non-Recourse loan program in volume, bought one or more pieces of distressed real estate, put 30% down from their IRA on rental properties and rehabbed them as rentals to generate retirement income.  What would these new sales and renovations mean to the local economies they would affect?

I've spoken many times about the unintended consequences of the meaningless Federal Government efforts to stem the tide of foreclosures. Growth in foreclosures continues in many areas and foreclosures will continue to happen until something is done to recognize the true value of the properties and reflect those true values in the current mortgage balances by writing down principal balances to market levels. Home Affordable and all the other government programs are bound to fail after generating billions in fees to lenders and servicers and in the end, most of the modified loans (98% without principal reductions) will default again within a few months because the loan balances are not sustainable and the downward spiral in bubble area pricing will continue.

Since the big money FIRE sector has not been required to lower principal balances in loan modifications, they have not and now we have a new class of foreclosures that result from what is being called "Strategic Defaults".  Owners of larger properties are beginning to realize that in the absence of secondary financing and a deteriorating price in their market, they are better off to stop paying their current mortgage and simply wait a year or more to get thrown out, then buy another property or rent one until they can buy again.

What will big government think of next?  How about a simple idea like supporting the efforts of small investors to earn a decent, safe return and rebuild local communities devastated by the burst real estate bubble?