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Reemergence of Single Family Investment Properties

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Although I still prefer multifamily properties for investment purposes, one of the offshoots of the housing crisis that started in 2008 is that the proportion of single family homes relative to all types of investment properties is rising.  In other words, an increasing percentage of investors are buying single family homes because these can be bought cheaply – sometimes for up to 50% less than their value just a few years ago!

The reason is that most foreclosed homes are of the single family variety, and as you are probably aware there is currently a glut of foreclosed homes on the market.  And as we all learned in Economics 101, the result of this over-supply is depressed prices, which makes these properties extremely attractive to investors.

There are currently over 3.5 million single family homes being used as rental properties throughout the United States, and thanks to the wave of foreclosures currently hitting the market, this number is increasingly rapidly.  Not only can these be purchased at below market prices, but they also offer an excellent opportunity to engage in rent to own strategies because oftentimes former homeowners that lose their house to foreclosure want to become owners again as quickly as possible.  And rent to own protocols make this possible, as these deals typically last for several years which provides enough time for the former homeowner to improve his or her credit score, which is obviously imperative for getting financing.

If you are thinking about buying a single family foreclosure, make sure you do your homework.  Work with a real estate agent who has expertise in this arena, as effectively working with bank REO departments and the like requires experience.  Also, get your financing in order prior to making any offers.  Foreclosures are often fixer upper homes, which makes getting financing trickier.  Thus, you’ll want to have these ducks in a row in advance to avoid the potential of losing a great deal over the financing.  Additionally, look for foreclosed homes in decent middle class neighborhoods that seem to be on the upswing.  Finally, do not buy a “McMansion”; instead, go for a 2 or 3 bedroom home that will appeal to first-time home buyers – your largest real estate market.

The bottom line is that the glut of US foreclosures has created a pool of below-market properties that you can buy, most of which are single family homes.  Just remember to work with an experienced agent, get your financing lined up in advance, and negotiate hard.  Also, focus on starter home properties in decent areas, and consider employing a rent to own strategy.  Good luck!

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