Investors Need to Pay Attention to Shifting Home Market

Phoenix investment homes, a no-no. Go south to Tampa and Atlanta if you’re looking to buy an investment home.

The old saying that location is everything in real estate applies whether you’re a small home investor or a large corporation. Why? Because the large investors are shifting their focus to newer markets as they scramble to compete with you, the smaller investor with less resources as well as other larger institutions, for those potentially lucrative investment homes.News accounts tell the story.“Major real estate investors are buying fewer homes in some hot markets while expanding in others as they race against rising prices to turn more distressed homes into rentals,” writes USA Today.That has meant that sales of once hot Phoenix homes are down and on a continuing path in that direction, according to various sources.California? Dream on if you wish but investor interest there may also have peaked. Prices have often gotten so high that investors can’t make the deals work.Instead, Southeastern cities (Atlanta and Tampa) are often mentioned as on the upswing.Just one major institutional investor has accumulated a $10 billion fund to pursue the single-family rental market, estimated JPMorgan Chase in a recent research report.That amount equals to about 80,000 homes. But investment funds continue to raise money, says JPMorgan’s analyst Anthony Paolone.Nationwide, there are currently 12 million single family rentals, most owned by mom-and-pop investors, Paolone told USA Today.

Why? The reasons are the same that you, the smaller investor, want to be in the market.

This is a case where the smaller guys have shown the larger ones how to have fun and profit in real estate. It works like this:

Buy distressed homes on the cheap. There are plenty of them. Fix them up cheaply (mainly cosmetic changes). Rent them out, sometimes even to families who have lost their homes to foreclosure. Then make money as home prices appreciate (and positive signs are everywhere in recent months).

The most popular homes traditionally have been three-bedroom, two-bath types. Price ranges are anywhere under $125,000. At those prices, landlords can often rent the home for an affordable price of under $1,000 a month.

Some of the major investors, often aware of in-house studies that smaller individuals are not aware of, have responded to how much faster markets have rebounded over expectations in the past few months.

What that has meant is that investors of all sizes, large and small, have become a significant part of that market in recent years.

But there is nothing cynical about this because landlords are supplying necessary housing. Prices are market driven and not a matter of ethics.

But the lingering problem here for everyone is to buy at the right price. Good buys are hard to find. So remember the old adage: it pays to shop around, and perhaps pay more attention than ever to where you are looking. ###

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Investors Need to Pay Attention to Shifting Home Market

Phoenix investment homes, a no-no. Go south to Tampa and Atlanta if you’re looking to buy an investment home.

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