Here's a good example of "investor" speculation fueling the mortgage crisis:
http://www.msnbc.msn.com/id/24569891/
(Self-absorbed man buys eight negative-amortization homes and loses his shirt when the market goes bad).
I have represented several clients with a similar story, though none used such a ridiculous mortgage product. In a neg-am loan, the borrower artificially reduces his payment BELOW the amount necessary to cover the interest. Principal is never paid. You read that right. The balance on the note gets bigger over time! As if interest-only mortgages weren't bad enough.
The real estate business is a mine field, and investing in it with mostly borrowed money (or in risky mortgage variants) puts your financial future in the hands of shaky tenants to pay the rent and a volatile real estate market to eventually recapture your investment.
There are thousands of people in North Texas right now who think they are the next Donald Trump. These "investors" are "investing" in real estate with other people's money, and for every success story there are ten others who have flamed out, unable to pay the mortgages on properties nobody wants to rent or buy.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment