Vulture investors are feasting on the depressed U.S. housing market. Deflating home prices, rock-bottom personal property rates and a rental market surging with people who have lost their homes are attracting swarms of vulture investors after distressed properties. However, typical vulture investing strategies are changing with the bad economy.Vulture investors flipped homes for a quick payout in good times. Current circumstances compel them to hold on to properties and reap rich rental profits.
Vulture investors swoop down on dead housing market
Vulture investors get their name because they swoop down and purchase distressed properties on the cheap. Places where home prices have dropped as much as 70 percent because of short sales and foreclosures, like Las Vegas, Phoenix and Miami, are lucrative markets. Home prices often were driven unrealistically high by their frequent flipping. These days, potential rental profits are looked at as the more stable long-term strategy. Today, vulture investing may serve as more of a stabilizing force for neighborhoods.
Vulture investing changes with the times
Vulture investors have switched from flipping to renting due to a number of factors in today’s housing market. Home prices increasing in perpetuity, the main lure for house flippers, are a thing of the past, said mortgage resource HSH.com. cash in purchasing low and selling low. And because millions of foreclosed borrowers have to wait years before they can get a home loan, they become the ready tenants for vulture investors buying properties for pennies on the dollar.
Vulture investors enjoy a large cash flow advantage
By paying in cash, rental returns start rolling in right away for vulture investors. The CNN article uses Las Vegas as an example, where prices have fallen about 70 percent and rents have only declined about 20 percent. Glenn Plantone, a vulture investor in Las Vegas, told CNN his net return on investment via money flow is 12-to-14 percent . The advantage of cash flow is that even if real estate prices decline further, the cash coming in stays the same.
Additional reading
money.cnn.com
blog.hsh.com
