I found a house for sale by Fannie Mae (government owned foreclosure) listed for $44,900. I made a bid for $40,200. After careful analysis, I thought we could buy it for 40, put in several thousand plus closing costs and have it in good shape and get it rented out with a total cost basis of $55,000 max. With an entry point this low, and a solid $850 rent, this house could be totally paid off in 10 years using just the rent to pay it off. Next thing you know, I'm 40 years old collecting all the income. Boo-Yah.
However, our government is not in business to make money.
It became clear to me that my offer was the best offer, but it was not accepted by Uncle Sam. How could this be?
Because I am not going to live in the home, Uncle Sam decided to sell the house to people that were first time home buyers rather than an investor. So let's say their offer was 38,000 vs my 40,000. Uncle Sam has made a decision nobody else would make just to promote social welfare. If it were anyone elses house besides the gov't, my offer would have been accepted.
FURTHERMORE, the first time homebuyers will receive the $8,000 homebuyers credit (the gov't pays for this too!) so the actual price rec'd by Fannie Mae is only $30,000 (compared to my $40,000).
I hope this little story opens your eyes a little bit.
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