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Why Savvy Investors Love Shadow Inventory

Published on Tuesday - September 25, 2012

Who’s whining about shadow inventory? Not the savviest real estate investors…they love it!

While a number of sources have recently said that the shadow inventory of homes has been decreasing analysts at Morgan Stanley still put the number of off-market foreclosure properties in the neighborhood of 5.7 million units.

However, even the head of the FHFA has made comments to the effect that it is too hard to accurately pin point exactly how much shadow inventory is out there and where it is hiding. Plus, even though there has been a big spike in loan modifications and short sales being approved in the last 6 months, there has also been a massive double digit surge in new foreclosure filings since the giant mortgage settlement.

So yes, there is no sugar coating the fact that there are masses of REOs and distressed properties lurking out there no one expects the market to be flooded with inventory any time soon. That means several years of these conditions will dual markets running at the same time.

When banks and the government hold inventory off market it helps push up the resale value of homes investors own or have locked down in contracts. Just in Phoenix, AZ property prices have risen by as much as 31% in the last 12 months.

Clearly there is still plenty of opportunity to grab discounted and attractive deals with profit potential and flipping them at premium prices.

So lock into that off market real estate and distressed property pool and flip it. Find ways to leap frog the competition and lock it up before they have a chance to bid on it and maximize the upside potential by who you are marketing those deals to on the back end. These are truly sweet times for real estate investing, don’t miss out!

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