Private Investor Says Don't Enter into Foreclosures Lightly

Published: Friday, 28 Oct 2011 | 2:01 PM ET I thought I would share a response to yesterday's blog post on the Obama Administration considering selling Fannie and Freddie's foreclosed properties in bulk to private investors.

Rick Sharga used to work, and speak, for RealtyTrac, a well-known foreclosure sale site and tracker. He recently jumped ship to join Carrington Mortgage Holdings, which does everything from asset management to residential mortgage origination, servicing and property management.

Here's Sharga's take:

"Your post today made its way through our offices pretty quickly, as we’ve been doing REO rentals for several thousand properties in our own portfolio for several years, and as part of Fannie Mae’s Tenant-in-Place program. We’d probably be one of the companies you mentioned who would be interested in buying some of the GSE REO assets and turning them into rental units for some period of time. But it’s not an investment to enter into lightly. 

(*Note: REO's: Real estate-owned properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt.)

This isn’t the slam dunk success story for investors that some of your sources suggested today. Rental margins can be extremely thin, the probability of success varies wildly from market to market, and an investor who doesn’t understand how the financials work could be in for a rather rude awakening. Managing a large portfolio of properties across the country isn’t exactly a walk in the park either, and there aren’t a lot of companies with the infrastructure to support that sort of initiative right now.

We do think that the idea makes a lot of sense from an overall housing market perspective. Done properly, it will remove a large number of distressed properties from sales inventory (and from the dreaded shadow inventory) which should help to stabilize home prices – and, in some markets, help stabilize rapidly-rising rental rates by adding rental inventory. It would take large sums of capital that are currently on the sidelines, and put them to use, which would be a boon for the economy. It would allow the GSEs to cap their losses on these REOs, and protect the values of their portfolios of performing loans. To your point, it would clear up much of the uncertainty in the housing market today by removing the overhang of distressed properties. And the timing is right, as there appears to be a growing demand for rental housing, while many potential buyers repair their credit, try to save money for a down payment, or just decide to wait out the market before they buy.

It’s not a panacea, but could be one of the best ideas to come along since the foreclosure tsunami hit. We’re just not sure how big a wave of investors we’re likely to see once people actually do the math."

Questions?  Comments?  document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick

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Travel Lightly: Our 5 Best Packing Tips

We're at the halfway point of the summer and it's almost time for me to shake off the dust of this town and fly off to parts unknown. I love traveling. In fact, I love it so much that I've often got my luggage out and open and waiting days before the actual packing needs to be done. But, as much as I love packing, I hate having a lot of luggage. Even in the days before baggage check fees, I rarely checked luggage. Here are my best tips on how to pack lightly and still look good when you get there.

• You do not need to wear something different everyday, you do need to be comfortable and appropriate: With that in mind, I use a packing formula: 3 bottoms for 1 week, 3 tops per bottom, 5 bottoms for 2 weeks, deduct 1 top and 1 bottom for each dress. True, that is not a lot of clothes but unless I am attending fashion week in Paris (hasn't happened yet), I can wear the same thing a few times.
• If you are going sightseeing or to a city, always, even in the heat of the summer, bring a cardigan (women) or a dinner jacket (men). I too vividly remember, as a child, my mother being asked to leave the Duomo in Milan because her arms were bare. Plus it comes in handy on a chilly plane. On that same trip, my brother had to borrow a dinner jacket at a restaurant. Not every place in the world is as informal as the States. On that same note, I always pack one thing I can dress up.
• Unless you are going to Antarctica or camping, there will be stores where you are going and you can always get what you need or forgot there. Apart from contact lenses or prescription medicine, you will be able to buy it at your destination. And, if you're in a foreign country, the replacement product will likely be more interesting than what you're used to.
• Forget the pack flat or roll debate. Bundling is best: I used to roll my clothes until Gregory discovered this method. Not only is it a space saver, it is genius at keeping your clothes from wrinkling.
• Pack one space saver bag: Just in case you buy a lot while you're away, the space bag may help you avoid having to buy an extra piece of luggage to bring it all back in.

Image: David Masters, from his Flickr, with a Creative Commons License, some rights reserved.

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