At present the only readily available loans for residential borrowers are grade-A loans and, to a certain extent, jumbo loans (at a premium, however). Although just yesterday Bank of America invested 2 billion dollars in Countywide and four banks (including Bank of America) borrowed 1/2 million dollars each from the discount window, no experts I have heard speak on the matter predict a quick turnaround in this liquidity crunch. In fact, the Chairman and CEO of Countrywide in an interview this morning on CNBC stated in pertinent part (and I paraphrase) that in the last 5 years high risk loans were authorized which never should have been given out. It stands to reason that no lenders are eager to repeat the mistakes of recent history. Meanwhile, foreclosures are increasing in local inner cities and this will eventually bleed over into other markets.
If sub-prime and alt-A loans will no longer be available and you are able to identify an area with no major condominium developments under construction (possible apartment buildings and potential competition), is it not an opportune time to explore purchasing rental properties?
This November-March may present quite a buying opportunity for rental properties with the ensuing months' foreclosures and loan denials creating an eager rental population.
Potential pitfalls, to name a few, are ongoing construction projects with sunk costs making abandonment cost prohibitive and/or mortgage lenders who return to the status quo of recent years.
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