‘Middle class’ millionaires facing foreclosure
Real estate news from the we buy houses team
So-called middle class millionaires, those with $1 million to $10 million, say they expect to lose real estate to foreclosure in the year ahead, according to a recent survey conducted by Lewis Schiff, a co-author of The Middle Class Millionaire.
The survey found 1.6 percent anticipate losing their primary residence over the next 12 months. Of those surveyed, 36 percent have a second residence for personal use and 5.6 percent of those expect to lose the property over the next year. Of those surveyed almost 45 percent own residential real estate as an investment, and 20 percent of those expect to lose their investment during the next 12 months.
“One of five plan to walk away from residential investment property,” Schiff said. “They’re going to walk away like they had made a bad portfolio decision. Some are losing $100,000 to $200,000.”
“We’ve heard of the subprime crash. Next we’ll see the residential real estate investors in trouble,” he said.
Many of these investors turned to so-called Alt-A mortgages, which fall between prime and subprime credit quality. During the housing bubble, such loans were popular because they typically required no or little documentation for a borrower’s mortgage application - an attractive feature for people with complex finances.
More real estate investors - even those with relatively deep pockets - heading into foreclosure doesn’t bode well for the pace of recovery in the housing market.
Schiff said one of the traits of middle class millionaires is perseverance and forging ahead when mistakes are made. But in the case of homes going into foreclosure, a toll is taken on the surrounding neighbors and community, he said.
But for some of these wealthy real estate investors, cutting losses on an investment property is similar to dumping a stock that went bad, he said.