Investors Buying Homes by the Dozen

An article at MSNBC.com talks about investor buyers in different areas around the country who are buying multiple foreclosure properties in packages at some amazingly low prices. One investor in Columbus, OH bid on almost 50 properties in various stages of decomposition. Even though many were in really poor shape, she managed to purchase a number of properties at an average of $3000 each.

It’s a lot like stock market arbitrage, in that investors can take advantage of an extremely low cost of capital and fire sale prices to buy multiple properties, make repairs and then bank great cash flows from a growing pool of renters. With rental demand up, these investors are quickly filling these properties and banking cash from the first month they’re ready for a tenant.

In Forest Park, IL, condominium units that sold for $180,000 during the boom are selling in volume for $13,500 each. Many investors are making these bulk purchases their new retirement plan, closing retirement investment accounts and plowing the money into rental properties.

Another example of how investors are making out in this market was recently displayed in Boca Raton, FL. Newly-renovated condominiums overlooking the golf course, pool and cabana were purchased for $19,000 each, and they’re clearing $300/month in cash flow after taxes and homeowner association dues. That’s a 19 percent return on investment, far better than the tiny returns these investors were getting in their other cash investment accounts.

Not all analysts agree that this is the perfect time to employ this bulk purchase strategy. They estimate that prices are going to fall another 7% in the near future, adding risk to this approach. One major risk is related to the lack of time and ability to thoroughly inspect each home. Repairs can end up being far more expensive than anticipated, doing major damage to return on investment projections. However, it’s definitely a lure for investors who see a growing pool of renters into the future.