There seems to be a new business model that has developed in the past 5 years or so, especially amongst financially large or well-connected corporations and financial institutions.
I am sure you have heard or read about this new method of managing risk and ensuring profits; it goes something like this:
Profits are privatized and remain with these business, while losses are socialized and reimbursed via taxpayers.
WOW! What a business plan right?
This shift has been going on and getting stronger since at least 2008, and unless you are connected or into influence pedaling, guess what? You will be responsible for both your profits and your losses. And our margins in the real estate world are coming under strong downward pressure.
The latest example of this accelerating phenomenon can be explored in this article… A Huge Housing Bargain — But-Not-For-You
(Side note: I would like to thank one of my clients Haochi, who also reads everything on BiggerPockets, for bringing this article to my attention).
Now that you have had a few moments to read the article, I am sure you have to be asking yourself — assuming that this approach to disposing of Government REOs comes to pass, how am I as a small business owner going to find quality inventory to continue to build my business?
And that is the million dollar question. Actually, try more like the “Billion dollar question”
In a previous life I supported the Federal Government as a contractor and I can assure you that it was a rare occasion when contracts were awarded to businesses that didn’t have some kind of “IN” with the agency placing the contract. I am not suggesting that this “IN” represented anything illegal, just that many of the players in the contracting world knew their agency counterparts very well and vice-versa.
So, as the article suggests there will be plenty of opportunities for organizations with substantial resource to participate in this program and where these organizations don’t have specific expertise in the world of property management, they will just bring onto their team one or more of the contractors referred to in the article.
All perfectly legal… and all at the exclusion of the ONLY community that has held this DAMN housing market together for the past 5 years… REAL ESTATE INVESTORS!
Okay… this all sounds very grim doesn’t it.
And, it could actually transpire just as represented in the article and the referenced Request For Information unless every one of you, myself, Josh, Haochi, Jeff, Jon, Rick and the entire membership on Bigger Pockets decides that we are going to either individually or collectively step up and let it be known that this approach as crafted, will not work! It must not reward large organizations at the expense of the taxpayer or small businesses… the very businesses that are keeping this economy alive.
What to do. What to do!
It’s simple, and here are a few suggestions…
1. Read the RFI… here is the link, http://www.fhfa.gov/webfiles/22366/RFIFinal081011.pdf and then contact the releasing agency and let them know that their planned approach is a train wreck in the making.
2. Contact every congress person and senator in your state and complain LOUDLY!
3. Contact your local real estate association and demand that they take a stand on behalf of their members by requesting that congress get involved in derailing this mess.
4. Rinse and repeat until we get the results we are looking for.
The choice is ours… the next step is yours!
Best of luck!