Real Estate Investors Shift Focus

January 22, 2013

Price increases in many once “hot” investment markets are prompting real estate investors to shift their focus elsewhere as they seek to buy up more distressed homes to turn into money-making rentals. 

For example, Phoenix was largely targeted by investors, but it has recently seen large home price gains, up 24 percent year-over-year in November, which has caused many investors to start to move on to other markets. In August, the percentage of homes purchased by investors in Phoenix was nearly 36 percent but by November that percentage fell to 38 percent. 

"The Phoenix-like phenomenon has migrated to other markets," says Sam Khater, CoreLogic economist, told USA Today.

Investors are changing their focus to Southeastern cities like Atlanta and Tampa, Fla., USA Today reports. 

Investors "are a significant force in the market right now," says Mike Prewett, president of Southern REO Associates, Atlanta. He estimates that investors are snapping up 40 percent of the foreclosed home inventory in the Atlanta area and multiple offers are common among nearly every foreclosure sale. Prewett says that many of the foreclosure sales will draw 10 or more multiple offers. 

Investors are expected to stay a powerful force in real estate in 2013. According to JPMorgan Chase research, institutional investors have $10 billion to spend on the single-family rental market this year. Investors reportedly are mostly targeting distressed homes in cities that saw the biggest hits to home prices from the 2006 downturn. The properties they most tend to seek: Three bedrooms, two baths in the $100,000 to $125,000 range. 

They plan to then rent these homes out for $1,000 a month, housing analysts say.

Source: “As Prices Rise, Rental Home Investors Seek New Markets,” USA Today (Jan. 21, 2013)

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