George Gammon got very rich by buying up rental properties in droves in 2012. He loves telling the story because it so nicely illuminates “contrarian investing.”
EVERYONE was telling him not to buy real estate because of the 2008 crash; it scarred everyone, and the broader narrative was that real estate was a dead asset.
I keep thinking of Mr. Gammon’s story because we have numerous investors buying up rental properties across the Sunbelt right now.
We have one investor in particular who is under contract to purchase nine different properties.
Most of our investors have two things in common:
- They are buying in Sunbelt markets that the “crash bros” insist will collapse completely. So, yes, our investors are following the George Gammon model and buying when social media is often screaming, “don’t buy!”
Are they timing the bottom perfectly? Who knows and who cares, as it is impossible to time any bottom – and savvy investors know that.
In addition, the properties cash flow. - Most of our investors are using DSCR financing – a veritable godsend for the mortgage world.
DSCR stands for Debt Service Coverage Ratio, and the financing allows investors to qualify for mortgages without verifying any income other than the property’s rental income.
Investors can still qualify for DSCR financing even if the rental income is insufficient to cover the full housing payment.
But when the rental income does cover the full housing payment, the interest rate is a lot lower.
And this is the case for most of our Sunbelt investors who are putting down 25% or more.
Not only do the properties cash flow nicely with DSCR financing, but the interest rates are very close to Fannie Mae’s best investor rates.
And even better, DSCR loans require far less paperwork and hassle than a Fannie Mae loan.
Conclusion: (1) There are many investment opportunities now across the Sunbelt, despite the “crash bros” or maybe because of them…; and (2) Investors worried about verifying sufficient income should always ask about DSCR financing.
