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How the foreclosure crisis helps apartment complex investors
June 19, 2009 by admin · Leave a Comment
If anyone like myself is interested in investing in multi-family real estate, chances are you noticed that over 45% of your marketplace is either in Foreclosure, shortsales, or REO’s, excluding certain metro markets like Hoboken. This doesn’t count the millions of others that are in 30 day defaults and likely heading that way. It makes a real estate investor curious on tenant/homeowner ratios which the foreclosure crises has created somewhat of a more balanced ratio between the two.
Some analysts say that we should expect upward of over 8 million foreclosures this year in the United States. I myself am gearing up to purchase multi family properties and I also will also be selling quite a bit to interested investors.
The fact of the matter is that everyone is now realizing that there is a direct and obvious correlation between foreclosures and the multi-family market. Due to the staggering number of foreclosures, this in fact bodes well for multi-family:
- Millions of former homeowners are becoming tenants.
- Rental rates have stabilized in declining markets.
- Due to a larger ratio of homeowner/tenant use, rental rates have in fact increased in certain markets.
- Vacancy rates have significantly dropped.
Basically, the multi-family real estate market is improving and benefitting from the downturn of the general market. It is expected that real estate investors of multi-family will reap huge gains. Taking advantage of low acquisition prices and having higher rental performance is something that is positive in the Fort Myers real estate market at the moment. Ft. Myers provides a great opportunity in a city that is showing strong signs of a bottom and expedited recovery.
For those that are not interested in investing outside of your home state, consider this: In certain parts of New Jersey, we have clearly not seen the bottom of the real estate market. Although the market is proving to be illiquid at the moment, I feel that over the course of the rest of the year, sellers will become more realistic and will be forced to compete with the short sale and foreclosure listings contributing to an already heavy inventory. Sellers of multi-unit housing will be more negotiable and we will see aggressive buyers for the rest of the year.
Using Ft. Myers as an example, tens of thousands of homeowners will be making the transition from homeowner to tenant. Occupancy rates in multi-family buildings have skyrocketed. Although many areas of NJ do not have a problem with occupancy, it is not as healthy as it once was, but will soon be coming back with a vengeance.
You can prepare for this waive by purchasing multi-family, taking advantage of low rates and favorable terms. Let me know your thoughts on multi-family and how the foreclosure crisis is affecting your market.
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