Home Buying Strategy – REO to Rent

When purchasing a home in Daytona Beach, you may be competing against a new class of investors. Out of the real estate bust of a few years ago, we know that many homes have gone into foreclosure. Although those numbers are falling, there’s still a significant number of foreclosures in process and they won’t be going away for some time.

REO to Rent investors are a new class who are adopting a buy and hold strategy. REO properties are Real Estate Owned properties where the lender has taken possession of a foreclosure and is marketing the home for sale.

These investors are not just individual investors. Companies such as American Residential Properties are public companies that were formed specifically to take advantage of the market. There are also hedge funds like Carrington Mortgage Holdings who have been active in the market.

The National Association of Realtors reports that investors accounted for 19% of home sales in April and 24% in 2012. These numbers tell only half the story. The number of distressed properties on the market has been falling over the past two years from about 40% two years ago to about 25% currently. These investor purchases and number of distressed properties sold suggests that investors are buying most of the available short sale and REO properties.

Why Investors Buy

Investors buy to make money. According to another NAR report, REO sale prices are still averaging 24% below market for below average condition properties and 13% below market for above average condition properties. Recent price increase have justified those decisions for investors in the REO to Rent class who have purchased over the past few years.

A Little Different Take

In the Daytona Beach area, we are seeing another version of this. People are buying their retirement home now and renting them out until they retire in 5-10 years. These invest for retirement people are locking in the price now and getting some good tax breaks with their future retirement home as a rental property.

The Market is Changing

Prices are rising. Mortgage rates are rising. Economic conditions seem to be improving and then stagnating. The market is always changing. One of our goals is to keep you abreast of what’s happening. Please give me a call at 386-566-7503 to discuss the current market and recent changes and how they may affect your options.