The 2009 recession did no one any good. People lost their jobs and lost their homes. It was a tough time but the international economy did improve. In fact, from 2011 onward, hiring rates increased and people cautiously started investing in real estate. However, there was still one problem of unsold stock. Banks were left with more than two billion homes in unsold stock and a depressed real estate market meant that buyers were scarce.
The good news is that 2012 – 2014 has seen a steady improvement in foreclosure investment as local and international buyers have stepped into the market.
Changing Times
Home prices are at a historic low, and distressed properties are selling at a discount of 35% or more. In fact, in most parts of the United States, investors are rushing in to snap up bank-owned and foreclosed properties.
The Waypoint Real Estate Group was one of the first companies to jump into the foreclosure market and they snapped up more than 2000 houses in California. The investment group renovated the homes and immediately put them on the rental market. This foray was quickly followed by The Blackstone Group, American Residential Properties, and American Homes 4 Rent. All these investment companies purchased properties, renovated them and then opened them up to the rental market. As a result, rental rates improved steadily from 2011 and are now at an all-time high.
Good Time to Invest?
Industry experts like Jeff Adams are quick to point out that foreclosures are available and they are open for private investors as well. However, the actual process of buying a foreclosed home is complicated and fraught with legal issues. There are basically two different types of foreclosures and most US states follow one of these two categories.
Non-judicial closures take place quite fast and the bank owns the property within six to eight months. Judicial closures take a longer time as judges are reluctant to push out suffering homeowners from their homes until the last minute. As a result, ‘zombie homes’ or homes that have no clear owner are common in judicial foreclosure states. These homes are often decrepit and they bring down the value of the entire area.
For investors, this is not bad but it does mean that they have to prepare themselves. Investors need to do a significant amount of research on the local markets they are interested in for investment to avoid these problems. For example, appreciation in home prices varies from place to place.
In non-judicial foreclosure areas like California, the foreclosure pipeline is dominated by large investors and property prices are already high. On the other hand, the states of New York, New Jersey, and Connecticut are seeing a much lower property price appreciation but this has been combined with a tremendous fall in new constructions.
As new homes are unavailable, Jeff Adams, the #1 real estate trainer, points out that these areas will see investors scrambling to find homes in good areas. He states that preparation is the key to making a profit in any kind of investment. The foreclosure market is vast but with the right research and training, it is possible to make a ‘killing’ and to make it quickly.
