Sell sell sell. The amount of foreclosures to come will dwarf what we have seen so far. Bottom looks to be 2010-2012. Even the commercial market is beginning to finally crack as well as NY city proving nothing to be immune. The banks know what they have coming on their books, that's why they are trying to dump as much as they can right now at these prices (and they are the lowest offers). Too many people still barely holding on, once all the variable resets come and the BIG wave of foreclosures hit the panic selling will start. Then it will be BUY BUY BUY! But that is 3 years away and much cheaper than these levels.
I agree with this unless you can find something that is cash-flow positive as was mentioned above. One question now is whether or not the over-supply of houses for sale is going to expand the rental market and cause an over supply in rentals, which would then drive down both rental prices AND sales prices. Also to note is that the real estate vulture funds are starting to circle. One "strategy" I have heard of is designed to artificially LOWER prices in decent neighborhoods so that vulture funds can scoop up real estate at even cheaper prices. Basically, the group buys a few properties in decent but not too expensive neighborhoods then effects a short sell to themselves through a separate entity they control. Because houses are valued based on comparables sold, when they sell at a loss and at lower values, those who need to sell now seem to be way over-priced. Easy way to dollar-cost average into neighborhoods. Personally, I am waiting for a MAJOR spike down before trying to step in, and if this doesn't occur then I'm not worried about prices running away from me. Good luck to all.
I think its a bit early yet, but the idea is very solid with the caveat being that the area you are looking in has positive population growth. I live in a northern suburb in Metro Detroit, and the educated people are leaving the area & the blue collar are being offered their same jobs for 50% of their old wages so the real estate situation here is skewed. I think that in order to use this strategy one needs to throw out lots of offers that may very well get laughed at until the supply of houses gets large enough that its not a laughable offer to the banks anymore. As an example friend of mine picked up a home that sold 2 yrs ago for $180k, was offered for $130k & she paid $100k for it after some back & forth with the bank. They probably would have laughed at the offer a couple months ago. I am not an expert on this but in past dealings I was lead to believe the banks have some sort of algorithm that they use to set the prices that they sell these properties for......something along the lines of 'we'll try and sell it at $250k for 6 weeks, then drop it to $225k for 6 weeks' and so on. I think its hard to gauge what a 'comparable' property is with the current market. I have even heard of a fund or two trying to get a couple local people to do a lot of the leg work on buying up large blocks of properties from the banks around here so who knows..... Regards, Eric
You're quite right P the hood's that is a gonna work best in (at least right now) are gonna be Hispanic working neighborhoods. I've been working on a spreadsheet that will yield a Max Offer. ASSUMING all the input estimates are correct (big assumption.) My formula says that 90K would about the max price to hold or flip a FLA condo assuming 150K. That's also assuming a ZERO repair budget since it's a newer high rise. That's no where close to a deal that I would want Westside of LaLa Land? Dude ...I'm talking Riverside and San Berdu and the way cheap parts of Ventura counties. REO and HUD list are growing exponentially. I've currently got an offer out on a REO in the East SFValley. I'll let you know. Doc Slum Lord
Dr. Z - Did you think about selling them on a land contract? That may reduce your headaches in dealing with shorter term rentals & maintenance costs and so on. Before you make a move make sure you watch the bailiff in Roger & Me by Michael Moore. He was pretty good at getting people out of the house when the didn't pay the bill, besides he wore a helluva suit & hat while doing it. If you watch that part a couple of times, you should be well prepared to be a slum lord. Eric
It's been a long time since I've seen that movie. If I remember correctly he was a big Dark Green Marshall or Deputy. The scene that really got me in that movie was "the rabbit women." Then even she got shut down. Brutal. Honestly I don't plan to be a slum lord. However 40-50 paying tenets in rehabbed buildings that's spinning off cash, throw in a Commercial Building or two and a big multi-unit can easily be packaged up and the yield and the asset sold off. Then I'll play CDO administrator and collect the fees. Or something like that.
What kind of deals are you finding in Phoenix? You need a min of 50% off the peak to even think about it. imo.
2 auctions on condos, i have seen 62.5% (in person). 44% ish, on a few REOs in N. Scottsdale. like i said, i dont think the low is in but i am starting to do more homework, and getting prepared. it will simply be a numbers game. i am fine with the idea of renting this winter and maybe even next winter when i split from the cold/snow! keep in mind, like trading IT is nearly impossible to buy the exact low, or sell the high SO I fgure I ll simply do what works best for what I want/ can afford, etc. THEN, dang if the bottom falls out in 2010-2012 .... BUY and BUY somemore. this might be one of those times WHEREBY the market rewards those with NO debt, and a good savings! -- SOOOOOO Un-American!
I agree with you, low not in, but can you actually get the low anyway? As a British investor i'm not aware of the mechanics of the US market. However, if a bank reposessed at $347,000 and is now selling at $189,000, does the new owner give the bank the $189k and the house is theirs 100%? or do you have negotiate on the bank's shortfall too?
There are good deals out there. Last year I had someone come to me looking to get off 5 condos here in Chicago. I paid 500k cash for all 5....sold two to make my money back plus some. I rent the other 3 out for 2500 a month. Not too bad. If you want to buy RE from banks and what not. Establish a good relationship with the asset manager at a bank. They generally have the last say. I have a buddy of mine who is an Asset manager here in Chicago and the deals are pretty good, if you are looking long term.