Wednesday, March 4, 2009

Oops! Who Clobbered the Mom-n-Pop Investor?

As contractors, we real estate agents have to create ways to compensate for a lack of a benefit package. Perhaps you, too, are in the same situation. As you all know, the goal of the new Bailout Plan is to reduce homeowners' monthly payments to affordable levels. But the plan does NOT apply to real estate investors. This initiative is available to help homeowners retain and refinance their primary residence. However, those with multiple properties, even small investments that barely break even, need not apply.

There are many people who struggled to save and invested back into our economy as a means of obtaining financial security. Doesn't it make sense that we try to keep those people afloat as well - especially if they pay on time, have documented income and high FICO scores? (In other words, they earned the same considerations.) Quite honestly, it scares me to think how many mom-n-pop investors - and we're not talking Eli Broad here folks - are going to walk away from property they cannot refinance, especially when the lower rents are not covering the adjusting mortgages. How will this help any of us? If the government is trying to stop the stream of foreclosures, has anyone considered finding a way to help small investors hold on as well? Who is more likely to walk away from a property that cannot be re-financed to a reasonable rate - the person trying to re-fi a primary residence, or the small time businessman who knows that if he lets his rental properties go, he can still keep his residence?

There seems to be an image of an "investor" as a bigwig in a shark skin suit sucking on a cigar behind the steering wheel of a Bentley. But let's get real here. There are many hard-working folks who used property investment in place of available 401ks. Okay, so you may be thinking, "Why didn't they use IRAs or Sep IRAs? Good question. Well, one struggling "investor" (who drives a Pontiac) told me he used some equity from his residence to buy a few cheap properties a few years ago because his wife was sick. He believed in the economy and trusted that he could get some equity built up. Then, if his wife needed more treatment, he could sell if necessary and not be faced with the penalties of IRA's. Of course, this is just one story, but think of how many people out there have an extra property they are ready to let go. Is anyone else wondering how the Big Bailout is going to address THIS issue? As more REOs threaten to take us further down that slippery slope, why are we ignoring the small investors who need some assistance. After all - WE NEED THEM.

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