Foreclosure Crisis Aided by Company

By Mike Colpitts

A New Jersey company has introduced a real estate investment program that’s helping to solve America’s foreclosure crisis, selling low priced older homes to investors that net as much as 16% in profit a month.

First Fidelity Homes of Teaneck, New Jersey purchases homes from banks and mortgage companies in bulk, and then re-sells the properties to owner occupants and investors on land contracts offering attractive returns to investors. The company has acquired more than 280 homes in the year it has been in operation in sixteen states, mainly in the eastern half of the U.S.

Older Home Foreclosure

“We set it up to be a win-win situation for the homeowners and investors so that the homeowners can purchase a home for less than rent,” said First Fidelity CEO Farouk Sheikh.

First Fidelity has purchased homes from Wells Fargo, GMAC, Suntrust Bank and the federal home loan lending giant Fannie Mae. Most of the properties are older ranging from the early 1900s to 1950, according to Sheikh, who says many of the homes have been neglected and need repairs.

As foreclosures rise, banks facing the worst foreclosure crisis in history are looking for alternatives to sell off properties they formally repossess, and many homeowners looking at property in the current market want homes that need little or no work presenting a problem for bankers.

As a consequence Fidelity is able to buy homes for substantially under market in bulk averaging from a few thousands dollars to $15,000 a home and re-sell the properties at a profit.

The company employs home inspectors who examine every home after Fidelity purchases them in bulk, carefully accessing what work they need before they are re-sold.

“We buy a house for $15,000 and then we inspect it, put up a for sale sign and sell them at a discount,” said Sheikh.

Fidelity is buying 15 to 20 properties a month, making a small but steady dent in the foreclosure crisis helping many first time home buyers pay less on a monthly mortgage than they were paying in rent.

Instead of flipping homes to make a quick profit after making repairs, the homes are sold at a discount. Sheikh, who is a former banker, wants to help Americans achieve home ownership in the fall out of the financial crisis even as millions of Americans lose their homes to foreclosure. He compares today’s market to that after the Great Depression, in which President Franklin D. Roosevelt set up the “New Deal” to stimulate the new home building industry and increase home ownership.

The investment strategy is based on high cash returns for investors secured by real estate, who do not have to take an active part as a landlord.

“We figured out a way to create a win-win situation for hardworking American families who wanted to own a home and for investors to make excellent returns in foreclosure investments,” said Sheikh. The homes are purchased on installment land contracts and then refinanced by the homeowner usually within a few years to obtain a lower interest rate, and pay-off the investors.

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