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Federal government as a landlord?

Federal government as a landlord?

Raise your hand if you think the United States government would be a good landlord. Anyone, anyone? You’re right class, it’s a horrible idea. But this could become a reality if the Obama administration plan to rent some of the 280,000 (at last count) Fannie Mae, Freddie Mac, and Federal Housing Administration (FHA) gains traction. I’ll ignore how negative this would be for the real estate investment community in terms of limiting the inventory of properties to purchase and simply point out the feds would make terrible landlords. If you have ever bee involved in the purchase of a government-owned foreclosure, or worse yet a HUD property, you’ll know that they can’t even manage to properly secure these homes and provide a smooth transaction. Imagine that same amazing efficiency at work over the long-term if the government were to start renting out these homes instead.

If they sub this work out, things could be even worse. It would further politicize an already too political housing industry. With the huge money that would go to the people landing those contracts, one doesn’t have to imagine too hard to visualize the political favors and under-the-table deals that would swarm around that.

There is no doubt that the glut of foreclosures now owned by the government is a problem. And with 70,000 such properties currently on the market, 248,000 in total inventory, and potentially millions more such homes coming in the next few years, this problem will not be going away soon. But sitting on these homes will only prove to worsen the problem over time. If the Obama administration really wants to help, maybe they should spend this effort trying to improve the sale process of existing HUD homes as well as make real efforts to get the federal government out of the housing business. Because as long as the feds keep meddling in the housing sector (often with good intentions) they only make the problems worse.

via Associated Press

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Matt Kastner

Matt Kastner is an Investment Real Estate Consultant at St. Louis Real Estate Society in St. Louis, Missouri. He is also develops properties on the side through Threshold Properties. When he isn’t representing investors in the purchase or sale of multifamily properties, rehabs, foreclosures and other income producing properties, he is often taking on rehab projects himself. He lives in South St. Louis and has been in the real estate business since 2004.

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