Been reading about this topic lately how institutional investors (backed by venture capitalists), are buying homes for cheap, dressing it up for up to $30,000 and renting them out in the hopes of someday unloading them when the market picks up. Sounds like a good idea to me. And many have said this is good for the market, probably one of the reasons why a local market can hit bottom.
Why? They slurp up huge inventories and in a way creates a false but real competition against normal buyers, like first time buyers and individual investors. Here’s what’s happening to Phoeniz, Arizona:
“By purchasing and holding tens of thousands of existing homes, investors have created a demand where little had existed. They’ve also drastically reduced the inventory of homes for sale and helped boost prices over the past six months.
That’s good news for homeowners, but investor groups’ dominance in buying up the supply of existing homes has alarmed some lending institutions and frustrated countless Phoenix-area residents attempting to buy homes for themselves and their families.”
But some people are worried about this trend, especially the mom and pop buyers who has to compete against these investor’s deep pockets. Huh. Maybe that’s why it’s getting harder to get homes here in Reno, maybe we’ve been secretly infiltrated?!
Yea, that’s kind of a bummer for the little guy (me included as I plan to buy a rental soon). But I can’t say what they’re doing is illegal. This kind of fish net investing have already alerted authorities Here are more excerpts from the article (and yes, they have invaded Nevada):
Government-sponsored loan guarantor Fannie Mae was the first bank-owned home seller to express concerns about the destabilizing effect investor dominance in the housing market could have on local communities. In response to those concerns, Fannie Mae created and has been pushing a program called First Look, which prohibits investors from bidding on Fannie Mae-owned homes for the first 15 days after they are listed for sale.
In Nevada, the state hit hardest by home foreclosures, the prohibition period for investors is 30 days.
I wonder if the above statement was talking about Vegas. No, no, no I take that back I remember talking to an agent who was the exclusive agent for an investment fund scooping up hundreds of properties, but they difference is they’ve been flipping the property..”no waiting” apparently is their game.
So buyers be aware, know that competition just got tougher. Be smart. Be decisive when you find the foreclosures you like.