Here is an excerpt from a story I read today at Naked Capitalism.
Fannie Mae sold 699 Florida properties, appraised at $81.5 million, for $12.3 million cash to San Diego based Pacifica Companies. In exchange, Pacifica must rent the homes, paying Fannie another $78.1 million from rental proceeds, but during that time Pacifica is allowed to keep a 20-percent management fee plus 10-percent of rental proceeds.
If that doesn’t sound like money for nothing, like the song goes, Fannie sweetened it by adding a trigger allowing Pacifica to keep 50-70 percent of rental proceeds, depending upon performance, after Fannie’s been “paid” (read: collected rent) amounting to $49.3 million.
Finally, adding insult and injury – to the American taxpayer and the former homeowner – Pacifica can eventually sell the houses and keep the proceeds or use them to pay off the expected rental income stream faster.You can see how the public is not being able to bid on these properties and the small investor is getting left out in the cold. Not only are we seeing the transfer of wealth out of the home owners hand, we are seeing it put into corporate hands without anyone else ever having a chance to buy property at such great terms. The very vehicle for the small investor, real estate, has been taken away by real estate meltdown. Now quasi government agencies are dictating this redistribution of wealth out of the hands of the common citizen and into the large investment companies. The long term effect of the Wall Street grab to take away the last hope for the little guy, real estate investing, has now come full circle. It is likely millions of properties taken back by Fannie Mae will end up in the hands of corporate America, who will become some of the nations largest land lords.
It is hard to believe but it is actually happening. Bank owned or repossessed homes have often been some of the best deals for new investors, small time investors to get started building their portfolio. Now many of these properties are not evening seeing the market as they are sold in bulk to large companies at very favorable terms and interest rates.
How long will this continue? Will it forever effect the real estate landscape and permanently be a massive redistribution of wealth? It seems like the massive real estate meltdown has actually helped the rich get richer and the average and middle class citizen get poorer and poorer.