New April housing index data shows prices of REOs jumping 5.5% over the last year, while super-sized investment groups scoop up packages of properties for rentals. How long will individual real estate investors be able to compete?
REOs have been in short supply in many parts of the country during the last year but the new free flow of foreclosures since the giant mortgage settlement could ease the competition a little. Still, the hottest markets threaten fierce competition for the best properties and thinner spreads for those flipping houses. Depending on where you are focusing your real estate investing efforts it could be wise to expand or add other lead sources to your funnels.
While Fannie and Bank of America’s REO to rentals programs may have some appeal to large investments groups who are happy with much smaller returns in exchange for regular income there is no doubt in professional circles that these portfolios come with a lot of liability and many headaches waiting in the wings. How many of these investors will see positive returns or end up losing these properties will have to wait to be seen but it is unlikely to be the pot of gold many expect. Property management, maintenance, title and eviction issues will no doubt be far more challenging than anticipated.
For newer real estate investors and experienced ones looking for better deals with less drama there is still a great window of opportunity for short sale profits during the next few weeks as well as larger discounts and less competition for investors marketing direct to sellers during the pre-foreclosure stage.
Well-chosen properties will still continue to provide healthy spreads for flipping and those poised with winning marketing plans for the peak summer buying months have the opportunity to crank up the volume and cash in big throughout the rest of 2012.