A feast for vulture investors is being served by the depressed Americas housing market. Flocks of vulture investors are snapping up distressed properties ripe for the plucking due to depressed prices, record-low interest rates and a strong rental market driven by people who have lost their houses. Nevertheless, typical vulture investing strategies are changing with the bad economy. In boom times, vulture investors were home flippers looking for quick loans. Now that times are bad, using properties to generate healthy rental incomes is the preferred approach. Article resource – Vulture investors move from flippers to landlords in down market by Personal Money Store.
Vulture investors circle a struggling housing market
Vulture investors get their name because they swoop down and purchase distressed properties on the cheap. CNN reports that they focus on places like Las Vegas, Phoenix and Miami, where foreclosures and short sales have dropped prices up to 70 percent. Home prices often were driven unrealistically high by their frequent flipping. Now they consider potential rental profits, a far more stable, long-term investment these days. Vulture investors today may really be helping stabilize neighborhoods.
Vulture investors wearing a different hat
Several factors presently occurring within the U.S. housing market have changed vulture investing strategy from buyer and seller, to buyer and landlord. Mortgage resource HSH.com said ever-rising home prices, the meal ticket for house flippers, are a distant memory. Purchasing cheap just to sell cheap doesn’t make sense. Also, millions of foreclosed borrowers become tenants for vulture investors who got to the properties for a song, because they have to wait years before they can get one more mortgage.
Vulture investing: the cash flow advantage
Vulture investors that pay in cash can start making cash from the first month they start renting the homes. Las Vegas, where prices have fallen nearly 70 percent and rents have only dropped about 20 percent, is held as an example within the CNN article. Glenn Plantone, a vulture investor in Las Vegas, told CNN his net return on investment via cash flow is 12-to-14 percent . The beauty of cash flow is that if real estate values continue to fall, the return for the vulture investor holds steady.
Additional reading
money.cnn.com
blog.hsh.com