Who’s Buying the Foreclosures?

The Denver Post ran an interesting feature article on Sunday, August 17. The feature with the byline of Margaret Jackson, discussed just what kind of buyer was snapping up the low priced foreclosures in Metro Denver. Turns out it is real estate investors, not the fix-and-flip bunch, but the serious folk that buy for long term hold. I have had extensive conversations with Margaret over the past year concerning the impending onset of this good news phenomenon, and I am most pleased that she wrote a well researched piece on this subject. The fact that long term hold investors are buying cheap is a strong indication that they expect to sell high. All of those unfortunate families that have lost out to foreclosure have to live somewhere, and after living in a house, it’s tough to go back to an apartment. The fantastic thing is, these properties are cash flowing. How can that be?

Well, it is actually pretty easy. The various financial institutions that have been foreclosing on homes find themselves with a bit of an excess of inventory. This excess of inventory is forcing values down to a point that it makes sense for the investor to buy such properties and rent them to people that have lost out to foreclosure. Investors are buying with cash, or making considerable down payments to obtain acceptable financing.

It is the market at work (albeit the bloody side of the market), with a little help from various levels of government. And a caution, before everyone rushes out to cash in on foreclosures, this is a long term investment strategy, probably 4-5 years. Those savvy investors who buy cheap and rent the houses for 4 years or so will fix an improve as necessary, and sell into a much busier market down the road.

This is an exceedingly complicated story that will take many blogs to fully explain, so stay tuned. In the meantime, thanks Margaret. Investors buying for long term hold is great news for the Denver area market.

Written by Larry D. McGee, Denver Realtor - Visit Website Sphere: Related Content