Investors Scramble To Snap Up Property – Commercial Appeal, Memphis, Tennessee

By Tom Bailey, Tom Bailey Jr.

 

Posted December 5, 2009

 

Story Link: http://www.commercialappeal.com/news/2009/dec/05/investors-scramble-to-snap-up-property/

 

Anyone looking for a killer deal on houses for investment and rental income better be poised to swoop down like a hawk on a squirrel.

 

“If there is an absolutely great deal out there, the market is dynamic in that it finds it almost instantly,” said Craig Knox, a Crye-Leike agent who specializes in listing foreclosed properties that lenders are trying to sell.

 

“More than one person figures it out,” Knox said. “You underprice something, even in this market, and people will flock to it.”

 

“This market,” of course, is a buyer’s market.

 

The mass of homes upon which lenders have foreclosed has created more supply than demand.

 

Still, demand exists for rental and investment property, said Greg Glosson, broker with Fast Track Realty.

 

“A nice property at a competitive price is a pretty hot commodity right now,” he said.

 

Scott Housewirth, a Crye-Leike agent who specializes in helping buyers buy foreclosed homes, said “it seems like the hot properties have multiple offers. That’s kind of a good thing.

 

“You’ve got to be on top of it quick,” he said. “There are so many investors who see the trends.”

 

Of course, tighter financing also has kept more houses on the market.

 

“The tightening of credit put a lot of investors out of the picture,” said Glosson. “They had been able to get 90 percent or 100 percent financing.”

 

Gone, for the most part, are the investors without much money of their own who relied on easy loans to buy houses for rental or resale, Knox said.

 

“The infomercial crowd is gone for the most part,” he said.

 

Now, savers and people with deep pockets are having a field day.

 

But they’re not necessarily steam-rolling the lenders who hold the property.

 

“The perception that the bank is out there just dumping this stuff is a misconception,” Knox said, who often works on behalf of the banks. “We couldn’t have a customer if we just suggested dumping these properties. Our job is to get them sold.

 

“(The banks) are not stupid,” he said. “We’re not stupid. … It’s market driven. We’re trying to minimize the time (a property is on) the market and maximize returns. It’s a matter of finding that.”

 

Housewirth has noticed that investors seeking housing are more local than in the past.

 

“Seems like a few years ago we got a call every other day from someone in California wanting to invest,” he said. “We just don’t get that anymore.”

 

Local investors know the Memphis market better, and are more familiar with the prices, he said.

 

Investors seeking rental income and a positive cash flow have a better chance to succeed when they buy at least a handful of houses, Housewirth said.

 

The rent income needs to be at least as much as the mortgage payment, but preferably more for upkeep, advertising, insurance and other expenses, he said.

 

It’s harder to create enough of a margin on just one house, but smaller margins on several houses can add up for a better cash flow, Housewirth said.

 

Different investors have different strategies.

 

Housewirth works with a physician who buys houses built no earlier than 2000. So when the market rebounds, “his values are still going to be high because of the newer age of the property.”

 

Another client buys $50,000 to $100,000 houses in all areas, renovates the interiors with new carpet and paint, and rents them out on a one-year lease.

 

“While the renter is living in there he’ll fix the outside up,” Housewirth said. “And then after the year lease, if the renter doesn’t stay there, his outside is now fixed up and he can sell it better.”

 

He also knows investors who only buy HUD foreclosures.

 

“Those are good deals,” Housewirth said. “They are easier to buy. You can just buy those online.”

 

— Tom Bailey Jr.: 529-2388

 

Buyer’s market

 

Real estate agent Craig Knox, who often helps banks sell foreclosed houses, shares some insight that potential investors might find useful:

 

Successful investors in this market have the ability to borrow under the tight lending conditions.

 

There’s not a constant flood of homes available; the supply ebbs and flows.

 

With good tenants and high occupancy, rental income has the potential to provide a much greater return than the stock market.

 

Realtors can alert you when a great deal becomes available.

 

Successful investors, knowing what they want and having a relationship with a Realtor, act quickly and confidently when opportunities arise.

 

Consider costs that include advertising, insurance, taxes, vacancies, maintenance and management.

 

“Dabbling” with the ownership of several houses doesn’t work. Success requires commitment.