One of a handful of Wall Street firms that offered financing, to investors who own rental properties, is now out of business and 30 employees are now out of work. What happened?
Firstkey Mortgage, LLC started offering financing to landlords 3 years ago to help fund investors that were taking advantage of the opportunity to buy distressed property at historically low prices with historically high cap rates. But according to Bloomberg News, the volume of loans being made wasn’t large enough to justify the infrastructure costs.
Higher home prices may be to blame. U.S. home prices have climbed more than 30% from their 2012 low, making purchases less attractive for some investors. The share of institutional buyers in the housing market - those that acquire at least 10 homes in a year - fell to 2.6% in the first quarter, down from 3.4% a year earlier. That marks the 11th consecutive decline, according to RealtyTrac.
Real estate investors can only get up to 10 conventional loans through Fannie and Freddie. If they want more property, they only have a few other choices.
For the full transcript, go to www.NewsForInvestors.com
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