Smaller investors return to US real estate market as bigger investors buy in bulk and consider flipping

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Investors return to market as private property investors are beginning to return to the US real estate market although they are looking at smaller projects as the fervent flipping and reckless borrowing of the boom years is now a thing of the past.

According to analysts those with cash and who don’t mind taking a risk now is a good time to invest as prices are reaching bottom in many parts of the country and even beginning to creep up.

It is in areas where prices have fallen most that investors are active, for example Phoenix, Arizona, where the average sale price hit a ten year low in April of $125,000 but has ticked up month by month to reach $134,000 in August.

‘Investors have started to return. They see prices have fallen so far below the trend that they consider housing to be a good investment,’ said Karl Guntermann, professor of real estate finance at Arizona State University.

Indeed, across the nation, residential property prices rose for a third straight month in July, encouraging investors to buy property. The S&P/Case-Shiller index of house prices in 20 metropolitan areas rose nearly 4% in the period.

While much of the renewed housing market activity is being driven by first-time buyers lured in by low interest rates and the $8,000 federal tax credit, absentee buyers such as investors and second home owners made up 41% of all purchases in the Phoenix area in August.

So intense is activity in some areas in the Southwest and California that distressed homes often receive multiple offers as first-time buyers compete with investors.

The bad old days of flipping though are not gone forever especially in areas like Las Vegas where property is particularly cheap, having fallen by 58%, and abundant.

Bob Schulman of The Montecito Companies, a Las Vegas based real estate investment and development firm, said it is buying about 100 bank owned properties in the city some of which they will rent but others they intend to flip as prices start rising.

‘The key to turning a profit is getting a steep discount by buying properties in bulk for cash and spending $3,000 to $10,000 in refurbishment, for a swift resale, he explained.

Todd Kaufman, a property investor in California is following a similar strategy. ‘Our design is to get homes sold quickly, and to improve them massively including installing the best marble floors,’ said Kaufman, who buys up to 25 homes at time from banks, short sales and auctions.

The buyers though still run the risk of seeing prices fall again. Recently experts have warned rising unemployment could still hit the property market further and a glut of foreclosed properties suddenly jumped on the market could see values plummet.

 

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