A year ago the US market was flooded with foreclosures and financing was almost impossible to get. Today, in many markets around the US it’s extremely hard finding an undervalued foreclosure. When I find a home for sale in the Dallas market, Phoenix or Las Vegas as well as many other cities, the competition is brutal.
Often times there are multiple offers on foreclosed homes, and who ends up buying the house? Corporations.
That’s right. The single family home market is no longer a mom and pop business. Articles have been written in the Wall Street Journal, Housingwire, Bloomberg and televised on CNN that Real Estate Investment Trusts (REIT’s), Pension Funds and Private Equity Firms have raised 8 billion dollars to buy single family homes for rental purposes. They will package the rents and sell them on Wall Street. Blackstone Group alone is spending 1 billion to purchase 6500 foreclosed homes in 8 different cities around the US.
So when you see articles stating that the real estate market has recovered, you know why. SO HOW DO YOU COMPETE, AND WIN.
These “Walmarts” of investors will drive out the Mom and Pop investors if we don’t change our investing methods. They are buying the best properties they can find and in the best locations, and they don’t mind paying more than the highest bidder. I don’t recommend buying in bad neighborhoods but there is a way to take advantage of the opportunities given us. Over the next year you will read articles describing how real estate values in many cities are increasing back to their all time levels. I have many success stories of homes I have sold investors in the Dallas market less than a year ago in the $80,000 and $90,000 range that have increase almost $40,000. You will see this happening all over the US due to the purchasing power of the Big Corporations.
So let’s ride the backs of the Corporations and take advantage of the appreciation that comes along with their purchasing power. One option is to purchase non-foreclosures at market rates (as low as can be negotiated) because the Corporate purchasing power is driving values up even with non-foreclosures.
We can purchase new construction again. The price of a brand new home is slightly higher than pre-owned homes and with the builder warranties and low maintenance charges along with the higher rent obtainable due to it being brand new, it makes sense to buy new again. If perfectly timed, we can purchase new homes at the builders most critical times when they have to substantially reduce their price.
Both of these opportunities offer the advantage of taking out a low interest rate loan. I don’t know when interest rates will increase, but they won’t stay down for much longer. Even if it takes a few years to go up, they will go up and you will be sitting on a 30 year loan with very low payments.
The other option is this: When homes are being purchased and flying off the market, and inventory is low, home builders will start building again. They are already bulldozing huge parcels of land and prepping for their rebound. Land is the undervalued asset of today and the value is still depressed so it can be purchased at low prices. There’s no income and no long term loans, so the only advantage is appreciation and I have seen huge appreciation in the past.
Whatever your investment goal is for 2013 I can help you attain it. Let me know how I can best help you prepare for next year.
Until that time, Happy Holidays.
(The Investors Realtor)
Ace Realty, Inc.
6841 Virginia Parkway Suite 103,
McKinney, TX 75071