Now is the time to buy Investment Real Estate
I understand that most people are concerned about how the economy is doing, the price of gasoline, and all the real estate foreclosures. Just as you are supposed to buy stock low and sell high, the same principle applies to investment real estate.
As I tour properties in Minneapolis and surrounding areas, with my customers, I am seeing the following vicious circle:
- Many real estate investors are simply walking away from their investment properties and letting them go into foreclosure. Single family homeowners are working with their banks to do “short sales”. This is creating a large inventory of houses that are sitting vacant for up to 1 year as the owners and banks go through the foreclosure process. Unfortunately, these are perfect targets for vandals. Additionally, these vacant properties are not being maintained and most fall into disrepair.
- The large foreclosure inventory (and the discount prices these properties are listed for) are forcing homeowners that want to sell to also discount their home to compete. Some will not be able to sell, as they owe more on the property than it is worth. Many will be forced into short sales or worse; into foreclosure as their only option.
- The overbuilt Minneapolis condo market has also taken many would-be buyers out of the market for first time homes. It has also pulled many renters out of the market with the inexpensive road to home ownership (potentially leaving the tenants that are not as financially sound).
- All of the recent changes (legislative and market related) that have happened in the mortgage industry within the last 6 months has made some buyers nervous, some buyers now do not qualify to buy a house, and some sellers are now finding their ARMs adjusting out of control (again potentially making them candidates for foreclosure or short sale).
As bad as this sounds to be a seller in this market, it is the best time in years to be a buyer. Here is what we are finding when we are making offers on properties:
- We are able to negotiate deep discounts on homes, especially Minneapolis investment properties. Some foreclosure properties are selling for 50% of their value. There are $99k duplexes and $200k 4-plexs on the market in nice neighborhoods!
- Sellers are willing to sell at our terms. We are seeing more seller paid closing costs, less negotiations about prices and terms, and sellers willing to repair items to finalize the deal.
- We are buying nice properties in nice neighborhoods that may just need TLC to get them back on their feet. Some of the properties are selling for $75-100k below value simply because they need $20-40k worth of work.
Historically, home values in Minnesota have appreciated 6% per year. The Minnesota housing market will turn around. If you have ever thought about Investment Real Estate, now is the time to start. The market is better than it has ever been to buy Minnesota investment real estate. Buy low today and sell high later.
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