Remaining Available Inventory of Distressed Property Offers Opportunities for Rental Investors
Published on: Wednesday, December 16th, 2015
RealtyTrac’s Midyear 2015 U.S. Foreclosure Market Report has confirmed what savvy rental investors have been suspecting: undervalued purchase opportunities are becoming more difficult to find. A total of 304,439 U.S. properties started the foreclosure process in the first half of the year, down 4 percent from a year ago and 18 percent below foreclosure starts in the first half of 2006, according to the RealtyTrac report. First-half foreclosure starts in 2015 were at their lowest level in any year since RealtyTrac began tracking in 2006—a 10-year low.
Florida, New Jersey and Maryland remain three of the best states for deals on single-family properties priced below market value. These states posted the highest foreclosure rates in the first half of 2015, according the RealtyTrac report, and will have significant numbers of available properties working their way through the pipeline.
When exploring these markets for potential investments, investors should be cautious as these distressed properties often require significant renovation. According to RealtyTrac, distressed property sells at a median discount of 43 percent over a non-distressed sale. This discount is the biggest gap between distressed and non-distressed prices since 2006, so these properties may attract several bidders looking for a good deal.
Other states with potential for price breaks include Delaware, Illinois, Indiana, Massachusetts, Nevada, Ohio, South Carolina and Tennessee.
At the metro level, Atlantic City, N.J. and the Florida metros of Tampa, Lakeland, Jacksonville, and Ocala are among the areas that offer the most opportunities for purchasing undervalued properties. Residential property investors may also want to study the following metro areas for further potential investment, as they’ve posted an increase in foreclosure activity in the first half of 2015 compared to a year ago: Boston (up 29 percent), St. Louis (25 percent), New York (24 percent), Houston (19 percent), and Dallas (19 percent).
As single-family rents and property prices rise and demand for rentals surges, it’s a good time for buy-to-rent investors to take advantage of the undervalued purchase opportunities now available.