a good business or morally wrong?

Hi all,

I was watching a doco yesterday called "the truth about property" and it showed a business venture/model that is proving to be rather contentious in both the UK and the States.

Basically, a company is set up and then advertises to buy properties from people that are under financial hardship - ie cannot pay their bills and/or cannot meet their mortgage repayments. Then when this company buys the properties, they turn around and rent or let them back to the previous owners (so that the people concerned do not have to move out of their beloved home).

But the thing is, the company buys the properties under market value and re-lets them back at either below market value or at market value.

The good thing is that the punters do not "loose" their family home and that they can stay there instead of the threat of being put out onto the street when the bank forecloses on their homes. the bad thing is that the punters have lost their family asset.

From this company point of view, they may be helping these desparate families by allowingthem to stay in the family home, but their primary motive is acting like vultures and getting family properties under market value and basically, building up a portfolio from people who are under financial hardship.

So what is the consensus on this business model? Is it a good way to conduct business or is it morally wrong?

Anyone aware of anyone doing something like this in Australia?

To be honest, i really don't know if this is the type of business that i would like to be involved in. On one hand, yes you are building up a portfolio at below market rates, but on the other, you are taken advantage and profiteering from people who are in a financial mess. This could be something that the folk at TT could go to town and chase you with.

I understand and that many companies do this on a corporate level and business in many ways is about taking advantage of other people - but is the business model described above morally kosher or not?



Thanks


g
 
I understand and that many companies do this on a corporate level and business in many ways is about taking advantage of other people - but is the business model described above morally kosher or not?

Thanks


g

Business is not about "taking advantage of people" (in most cases).

Business is about finding a need, and providing a service to fill that need which you can charge a fee for and make money from.

We fix people's cars that break, and we charge them for their misfortune. We are not taking advantage of them, because what is the alternative? They could fix it themselves if they wanted.

Banks lend money to people who don't have any to buy things with. They charge us interest for it, and fees. Some might say they are taking advantage of our misfortune.

No-one has to borrow the money though; no-one has a gun to their head - as is the case with the people who are selling their properties to the Company who rents it back to them.

It is sad that they are in this financial predicament, but most people are to blame for their predicament; they over-extend on borrowings, over-extend on credit purchases, don't save and increase their equity for emergencies etc.

What is their alternative? If they don't sell to this Company, they will most likely lose their house, have a terrible credit history for many years, and have to move out - probably still owing money to the Bank.

Personally, I have no problem with this business. If I was operating one similar, I would have ads that read something like "Are you about to lose your home? We can save you".

And, this would be an honest statement - I would have the mindset that I am saving them from losing their home.

Is it fair? No; not to the people who are reading the ad and have their hand on the phone.

But, they are free to not call.
 
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hi
I understand your concern but
would you say it was better to buy at undervalue sell at a higher price and put the family on the street.
you could say they are targeting a market this may be true but if the markets not there they have no target.
and that target is a market anyway.
for me it a glass half full senario is it half full or half emty and you have to look at the best case of the two
and buy and let them stay is lot better then the other.
know you can take the moral ground and alot do but the reality is that there is alot of people stood up on that moral ground and you may well have to push a few out of the way to find space but they are not buying these house anyway why
because these are distressed assets
and with distressed come a few things one of them is distress
and people do not wish to meet this distress head on
I can tell you its not some thing most people would like to do as a job as it is very mentally draining and very much so soul searching as you have to work out how to do three things
one buy the asset or how to buy the assett and thats not just here some money it does not work like that
two save the client from further distress and cost(usually they have no money not only no money but usually a heap of unsavoury lenders that you have to dodge but dodge and drag them with you).
three fix up there position so they can move on.
corporate aust does not help by selling it outstanduing debts to collection houses that take a cut and then chase now these guys are not buying assets they want the money and will close down anyone with 3k or over in debt

I think anyone to get into this market must first go a get a very thick steel armour because you need it andfor me to get into it and leave the client their if they can cover the cost is not the worst position but the best.
they stay inthe house they like they just dont own it
but they never did.
a funder did
and thats always been the case
and when you try to explain that it some thing that does not get thru and thats even to corporates or business or households.
if you are on that moral ground and looking down if you have a better way I am all ears( not saying you are there but just in case)
 
Business is not about "taking advantage of people".

Business is about finding a need, and providing a service to fill that need which you can charge a fee for and make money from.


Hi Bayview,

I'll rephrase my words above - I'll now say that "business, or making money, is sometimes is about having the upper hand".

But your point is taken in that no-one is forced to do anything. Banks charge us fees, credit card companies charge high interest rates, and Tel$tra is Tel$tra and they still have customes and still make money.

But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune - especially when their family home is at stake.

Maybe i have too much of a heart and too big of a consious to be a successful businessman.


Thanks


g
 
I understand and that many companies do this on a corporate level and business in many ways is about taking advantage of other people - but is the business model described above morally kosher or not?

Hi Bayview,
Maybe i have too much of a heart and too big of a conscious to be a successful businessman.

Thanks
g

I'll now say that "business, or making money, is sometimes is about having the upper hand".

Here are three statements you've made in two posts with the tone towards being in business as being dishonest, or a crook to get ahead in business.

What's with this attitude?

Being in business (and even big business) is not like this at all in the vast majority of cases.

Who has poisoned your mind?
 
But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune - especially when their family home is at stake.

If a tenant is unfortunate enough to not be able to buy a house, aren't we all profiteering by renting them one ?
 
hi
But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune I think this part is a bit misguided for me why because the misfortune was not in my case done by me I will use me as an example only by for me i am not taking advantage just the opposite in alot of case the family home is no where near the debt levels and we are not talking here the three bedroom in penrith we are talking the 5br on soverign island now they are not the same but they are family homes- especially when their family home is at stake.
and
Maybe i have too much of a heart and too big of a consious to be a successful businessman

this I think again for me is a bit misguided why because you have to have three thing to be in this business
a very sharp brain and a brain that can juggle numbers very quickly
a suit of armour that nothing will get thru as you are being hit from the client and the funders and all at the same time
and most of all a very strong heart and one that can allow for the client or the funder miss givings
and ears that can close off automatically when the swearing starts.
why do you think I can't get flammed
you can't flame charcoal there is nothing that will burn.
do you think you could walk in happy into a room where very one wants to kill each other.
you have a wife thats just lost everything
a husband that has no idea what to do he has done all he can and is left holding a empty house with no equity
a bank that the loan is at 150% and 200% lvr a reciever or trustee that is trying to find a way out
and usually two legals one a high paying bank and the other is young solicitor some time probono or they don't have anyone and us
they when the price or the offer come in thats when the swearing starts
and you think you don't need a big heart to walk into that.
I think these funds have streamlined it and I think they are doing it the same just in a smaller way and going for volume.
oh and you have to be the following
secular so no religion can come in
singular so on your own no taking sides
focus and don't let side games take you of coarse
determind that if you take a job you see it thru.
and make sure rthat at all time you do a deal in a business manner what ever happens.
be prepared that you are deal with people on the edge of life and some do not wish to stay on that edge and they do jump off.
so why they say I lost a client they lost that client not they moved away
be prepared that one day they are in a meeting and the next there legal rings to say whats happened.
and this is before the deals has been finalised.
heart boy do you need it
hope you well
 
I think you have to find your own moral compass. for example, I don't like the concept of wraps in property, now they aren't illegal and I am sure many people have operated them honourably and made money from the transaction and had happy clients, but they don't sit well with me so i don't do them.

If you think this is a good business and you feel that you could do it successfully, providing both profit to yourself and a solution to potentially desperate clients, then why not? I would only wonder how well it will work here as our property market is a bit different to the US.
 
I would only wonder how well it will work here as our property market is a bit different to the US.

I thought of this but i think it may work in our favour here. In the US, if people are unable to pay the mortgage, they can just hand the keys back to the bank and walk away and not have any repercussions on their credit history. Here though, people have the possibility of having a big B for Bankruptcy or a tainted mark on their credit history.

That alone may make it work here.


g
 
But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune - especially when their family home is at stake.

Maybe i have too much of a heart and too big of a consious to be a successful businessman.

I think it's all about perceptions.

I have bought mortgagee sales and deceased estates previously at a nice reduction to the market value. Some may say that I have preyed on the misfortune of others, however the reality is that these properties were going to be sold anyway. The regulations say that they must be sold at auction so that they can get the best possible price. At the point in time when these were sold I was, in most cases, the only bidder.

If you are purchasing something where the vendor is in dire financial stress, would the vendor be happy that you are purchasing it and saving them the humiliation of the bank repossessing the property and evicting them?? I think the answer is yes!

When a property gets repossessed, the bank will take it and evict the former owner. Then you have the costs of the property selling at auction. All funds raised from this process go towards paying the remaining loan. The vendor, if they have equity in the property, would be much happier for the sale to go through BEFORE all of this takes place as in reality the banks don't give a brass razoo how much the place sells for, so long as their loan is paid out.

If you are willing for the vendor to lease the place back from you, then they don't have the inconvenience of moving. They need never tell friends/family that they no longer own the place either, thus saving face.

Sounds like a win/win to me. You just need to get your head around it and if you think you can make a profit while dealing with the situation in an ethical manner, then go right out and do it.
 
Solving problems

Agree with Skater.........it's all about perspective and viewpoint.

It seems that these companies/corporations are solving problems for the over-extended vendors. They have removed the financial burden from the seller and also provided them with a (same) place to live. Sounds OK so far.

People who solve problems should always be recompensed appropriately. :)


Unless there are some shonky business principles being exploited, no one is holding a knife to these people's throat and forcing them to sell. Their own misguided (over-committed) financial situation led them into the mess to begin with; probably at a time when the bullish king tide was rising all ships and the banks were throwing money at all and sundry :(
 
The whole concept is basically a variation of the wrap concept but in reverse.

Would these distressed sellers be in a better position if they sold on the open market themselves with a tenancy in place?

Perhaps a better question is whether a fully informed seller would proceed with the transaction or whether the business operators would be comfortable in a similar arrangement being entered into by their elderly mother.

Is this business fair when in fact a simple refinancing would solve the problem?

Should unsophisticated homeowners/sellers cop the mega loss of the family home due to a lack of financial education? Especially when they are victim of predatory financial practices.
 
But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune - especially when their family home is at stake.

I've been on both sides of the equation - with my parents forced to fire sale all assets during my teens then my first purchase being from someone who had the banks closing in. I don't feel guilt about my purchase, just as I don't feel resentment toward those who got fantastic bargains from my parents.

Life was made somewhat more difficult by us not getting market value from those properties, but it wasn't the purchaser who put us in that position and ultimately, had that purchaser (or should I say purchasers) not come along things would have been much, much worse.

I'd question one's ability to understand until they've been in the position. Sometimes getting out of a sinking ship before you're too far down to resurface is actually a good thing.

Skater hit the nail on the head.

Cheers
Greg
 
Is it immoral to evict the tenant who cannot pay the rent???

I think asking about the morality of this type of business venture is the same as asking about the morality of being a LL in general. They both fall in a grey area that changes according to your point of veiw. Personally I don't think either is inherently immoral, but both being a LL and this business venture are open to the prospect of abuse and thus immorality (just like anything in life).
 
Business is not about "taking advantage of people" (in most cases).

Business is about finding a need, and providing a service to fill that need which you can charge a fee for and make money from.

Business is about making as much money as you possibly can, whilst paying as little tax as possible and externalising as many problems as you create.

Alcohol is legal, and there are alcohol companies. Tobacco is legal, and there are tobacco companies. If heroin were legal, there would be heroin companies. Businesses do whatever they are allowed to do within the law (and they often overstep the mark).

Businesses like Harvey Norman make a lot of the money from on-selling debts. They talk someone into a 3-year-interest-free loan, and at the end of this time, the interest charges go through the roof. HN sell the debt, and profit from it.

Consumers are fair game. You exploit them for as much as you possibly can, as often as you possibly can. Remember Kerry Armstrong on TV a few months back promoting the health benefits of Coca-Cola? This is the tip of the iceberg.

I don't agree nor disagree with this. But I'm not naive about it. And the real estate industry contains some of the biggest exploiters known to man.
 
If a tenant is unfortunate enough to not be able to buy a house, aren't we all profiteering by renting them one ?

Exactly.

For someone to be making money there's usually someone losing it. That's life. You can only be responsible for how you conduct the deal, not for the circumstances that surround it.

RC
 
But my point is, how would other people, and your conscious, feel that you are making money by profiteering from other people's misfortune - especially when their family home is at stake.
Maybe i have too much of a heart and too big of a consious to be a successful businessman.
Thanks
g

Don't buy anything made in China, Indonesia, Africa or South America where children are used as slave labour, and most others are slaves anyway.
Don't buy diamonds as they are also mined by slaves.
This just fuels the market that takes advantage of their misfortune & poverty.

Please instruct your superfund or fund manager not to buy stocks or properties from those who went broke when the stock market fell.
And also not to buy any assets & equities from those who lost half of their life savings just before retirement.

And since business people have no heart or conscience, make sure you never buy anything from them either.
As they only make profits from others misfortune.
And since when do the jewish rules determine what is a morally right or wrong biz model?
 
Don't buy anything made in China, Indonesia, Africa or South America where children are used as slave labour, and most others are slaves anyway.
Don't buy diamonds as they are also mined by slaves.
This just fuels the market that takes advantage of their misfortune & poverty.

Please instruct your superfund or fund manager not to buy stocks or properties from those who went broke when the stock market fell.
And also not to buy any assets & equities from those who lost half of their life savings just before retirement.

And since business people have no heart or conscience, make sure you never buy anything from them either.
As they only make profits from others misfortune.
And since when do the jewish rules determine what is a morally right or wrong biz model?


You ask these questions to Bayview. He seems to think that all Business deals are kosher and above board and that no-one has been taken advantage off....
 
IT's the model being setup to hunt for these which implies that targets would be searched for, then targetted - it is if the tactics used do 'con' for lack of a better word a less experienced/more naiive person into believing what the sales person is telling them and this selling ahome they did not need to that concerns people.. or me at least.. At the end of the day, people look for bargains/good value, so in theory that's not wrong in itself I reckon.

Bayview, you don't really think that businesses have never done anyting to exploit / 'ripoff' for lack of a better word their cusotmers do you ? How do you feel about all forms of advertising and what do you do in respponse to it again, and why ? Now what sort of entities make those ads ?
 
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