In a recent Realty Check report, Diana Olick notes that although the nation’s housing crisis appears to be stabilizing, a major area of activity in the housing market is concentrated on the market’s low end – sales of foreclosures and distressed properties. In states where many foreclosure actions have been backlogged in court, the resolution of these deferred foreclosures has thrown more properties up for sale. And this means good news for smaller investors following Jason Hartman’s investment strategies to acquire good deals on rental investment properties.
Nationwide, overall activity in foreclosures appears to be falling. But the housing market crisis produced so many foreclosure cases that they created a court backlog of months or even years in many cases. In some areas, people threatened with foreclosure simply stayed in their homes indefinitely without paying the mortgage, just because of the lengthy wait for court time.
Now that housing conditions are improving and prices of single-family homes are rising, these deferred foreclosures are being resolved, bringing a new wave of distressed properties to market. This means new opportunities for smaller investors, especially those using cash to finance their purchases.
Houses placed on foreclosure listings or auction sites are frequently sold at very low prices, with priority often given to a cash sale. An investor with ready cash can potentially purchase multiple properties for not substantially more than the price of one on the general housing market. Because potential owner-occupants of these properties generally need to work with lenders for financing and follow the standard process for a housing purchase, the advantage goes to the investor in the current environment of foreclosure sales.
A robust rental market, fueled partially by many of these displaced former homeowners who had to relinquish their houses to foreclosure, means that for available rentals, the tenant pool is large and stable. Investors in rental income property can expect to keep units rented for higher prices, with less likelihood of periods of vacancy and no income.
Single-family homes – for many, the most desirable form of housing — dominate the foreclosure lists, and the demand for this kind of housing continues to rise, especially among those former homeowners. And for many apartment dwellers, the parity in rents between better apartments and single family homes mean they, too, can take advantage of the benefits of a single family, detached home. Many households would prefer to buy a home, but don’t have the financial stability to arrange a down payment or loan, so they remain long-term renters too.
For smaller real estate investors, then, the recent dumping on the market of properties involved in deferred foreclosure actions can mean new opportunities to acquire one (or, as Jason Hartman advises, more) of these distressed rental properties for a fraction of the cost of a general market sale, especially if you have cash on hand. In today’s housing market, the low end can yield high profit. (Top image: Flickr | Casey Serin)
The Jason Hartman Team