Investors are capitalizing on a confluence of events: depressed home prices, rising rents and strong rental demand. A typical plan? Buy cheap. Collect rents to cover all costs and give themselves a nice monthly paycheck. Cash out — when home prices recover. (
“An unprecedented number of investors are looking into this,” says John Burns, CEO of John Burns Real Estate Consulting.
Investor purchases are strengthening demand in housing. Through the first nine months of last year, investors bought more than 26% of single-family homes and condominiums sold in 167 U.S. markets, indicate data tracked by Burns. That’s up from 21% in 2007.
“Right now it’s just that perfect storm for mom and pop investors,” says David Hicks, co-president of HomeVesters of America.
As with any real estate buy, good timing is key. And smart investors must be able to “crunch the numbers” for both positive cash flow returns, plus profit returns on sale. Paying too much, underestimating the costs to make a place rentable, or buying the wrong rental property or in the wrong market, can sink even cautious investors.
“Buying a house cheaply and getting someone else to cover the costs sounds like a no-brainer financial move. But there are some big risks, given the potential for hidden costs and the problem tenants. Because there are so many foreclosures in some cities, there’s more danger now that someone might buy a rental only to see the neighborhood deteriorate around it” John Burns says.
Real estate is also cyclical. Demand is strong now for single-family rentals because so many people are losing single-family homes to foreclosure. But as foreclosure rates drop, home prices are likely to rise. That could inspire home buying and lessen single-family rental demand.
For this year the rental buying market will be hot. But our window of opportunity to buy the right rentals, at super wholesale prices, for positive cash flow and equity profit when we sell… will not be here for long. You must seize the opportunities that present themselves to you today, before you look back and regret waiting.
Las Vegas, NV Real estate "Foreclosure Alerts" Below is a brand new Nevada foreclosure property!