It seems like the number of homes in arrears has increased substantially in the last year (21% more). I expect that 2017 and 2018 will not be any better.
This have a bearing on your ability to purchase a home at a reasonable price. See below:
2008 - 2,357 properties in arrears
2015 - 4,459 properties in arrears
2016 - 5,424 properties in arrears
Currently the banks have repossessed 5,110 properties which are valued at at least 490 millions in the banks book.
The typical situation is that these homes are put up for auction, because the banks wants them off their books quickly and it is more profitable for them to auction them off than to sell them for the remainder of the loan balance.
Obviously if the home is repossessed the owner looses every cent they put into the property and it damages their credit, so if you know how to speak with them you can come to their rescue and make a good profit.
If you can find out what homes are in arrears you could negotiate with the current owner, so the bank gets their balance and the owner gets some money off of you. Win win for the owner in trouble and for you because you get the home cheaper. The key would be how to find out which owners are in trouble, as this is not something banks will let you know about. If you find a way, you can turn a good profit, you can sell it for more, use it for yourself, of make it a rental property (long term or short term). I will look into this once I am settled in the island, but do not expect me to tell you my secret.
Rey
Statistics about repo properties
Thanks for this Rey. May I ask where you got those figures?
Yes Rey, what you talk about is to assume a mortgage. Most homeowners have FHA loan on their houses and FHA allow to assume mortgages by a third party, but the lender has to approve the new borrower. No appraisal required, lower closing costs than a regular purchasing transaction and the mortgage is transfered with the same amount of debt, interest rate and years paid.
(I'm a Mortgage Loan Originator.)
Another way is to go to a lawyer and transfer the title assuming a mortgage, but without notifying the lender. I don't recommend this, but talk to a lawyer. There are many homeowners offering the kind of business Rey talks about of selling the debt by a couple of thousands and The house is yours. Take a look at clasificados.
Danny Ruiz wrote:Yes Rey, what you talk about is to assume a mortgage. Most homeowners have FHA loan on their houses and FHA allow to assume mortgages by a third party, but the lender has to approve the new borrower. No appraisal required, lower closing costs than a regular purchasing transaction and the mortgage is transfered with the same amount of debt, interest rate and years paid.
(I'm a Mortgage Loan Originator.)
Another way is to go to a lawyer and transfer the title assuming a mortgage, but without notifying the lender. I don't recommend this, but talk to a lawyer. There are many homeowners offering the kind of business Rey talks about of selling the debt by a couple of thousands and The house is yours. Take a look at clasificados.
I had heard of something like that but was not aware of the details. What I had in mind was a common purchase for an amount above the loan balance with the difference going to the seller, no need to inform the bank as it is a normal sale and no need for getting a lawyer to do some special paperwork, my idea was for a cash purchase so mortgage is payed, owner gets some money and everyone is happy. But... I do like the option of assuming a mortgage if not doing a cash transaction. Thanks for the tip!!!!!
Google "Buying Real Estate Subject to the Deed". Be careful, there are some very unethical purveyors of that kind of information. With that said, if done right it's a great way to get a property and better for the defaulting homeowner than foreclosure. I am an attorney and quite familiar with the technique on the mainland. There are other ways to skin the same cat such as buying the house on owner-financing, or via land contract or contract for deed or the PR equivalent, assuming it exists. Of course all of this needs to be translated into PR law.
It'd be a great way to get a place to live at a good price, on good terms, or both. Given the bad local economy, I'd want to know the market very, very well before using these techniques to acquire rental properties. One would need to be quite confident in being able to rent anything acquired to ensure being able to keep one's word and pay on the underlying debt. Do your due diligence - some of the deals out there are surely excellent....and others would just involve you taking over the seller's problems.
Very good advice, check all the options with a lawyer, know the risks of each, make sure the house is owned by the seller and make sure you have a clear title and taxes payed before you move on it.
While these are time sensitive purchases, do not rush until all is done correctly and you understand your obligations.
In SF a lot of owners renting via AirBnb are getting in trouble, the same in Germany. Check there are no limitations before investing. While I am not aware of any limitations like that in PR that does not mean they do not exist or that they will not be put in place a year or so from now. There is also a tax you have to pay in PR for any tourist related short term rentals, I believe it is 15% and there is a specific site to fill it in.
Know what you are getting into.
I did a little "spare time for the heck of it" research. Given long-term rental rates in OSJ, there seems to be an opportunity to rent long term at fairly low rates and Air BNB the place out for a nice profit, or perhaps free living, assuming that the master lease permits sub-leasing. Property prices in OSJ appear to be quite high compared to the rents brought in, so buying for the income does not strike me as attractive.
Are property tax records in PR public as is the case Stateside, or are they private, as is the case in much of Latin America? I'd like to see those numbers to determine sales amounts and if asking prices are pretty close to selling prices, or if, like much of L.A., the asking prices are way high in comparison to what properties eventually sell for.
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