A Perfect Storm: Investors Buying Rental Home Foreclosures in Large Numbers

Paraphrased by Dr. Marshall Reddick

Shroud investors are picking up rental homes in huge numbers.  The reasons are because of their low prices, historically low interest rates and incredibly good rental markets.  Never have we seen these all together—it really is “An Incredibly Perfect Storm.”

The areas we are focusing on right now for investing are some of the best rental markets in the country.  In many cases, these markets are running between 1-5% vacancies or 95%-99% occupancy .  We are finding that in the markets we are in, such as San Antonio, TX , Boise, ID, Clarksville, TN, and Memphis, TN (especially after the flooding), vacancies are less than 2 or 3 percent.

Investors are being attracted by the excellent cash flows as well.  In the 30+ years we have been in business, we have not seen cash flows as good as they are today. With 20% down, it's not uncommon that our investors will be able to generate $200-$300a month in positive cash flow.  Put those cash flows back toward paying principle and you can pay off your 30 year fixed rate loan in about 10 to 12 years.  Imagine your cash flow then?!

Those that are losing their homes to foreclosure today are having to rent, causing a higher rental demand in most markets. Also, with the lack of new homes being built, low vacancy rates are not expected to change for a while.

We may find see appreciation return faster than the media portrays.  With more and more investors entering the market, the impact of foreclosures hitting the market will soften. We are seeing an increased amount of buyers in our network each month, and that has been increasing since the beginning of the year. 

Source: Fortune Magazine , “Forget Stocks, Don’t Bet one Gold. After Four Years Of Plunging Home Prices, The Most Attractive Asset Class In America Is Housing,  It’s Time to Buy Again" April 11, 2011, Pages 79-89


 

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