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A good friend/investor has approached me about forming a partnership to buy foreclosed homes for resale. Not for rental properties. But with the first time homebuyer's tax credit ending, some are saying that the market will take a huge hit and far fewer homes well sell in the second and third quarters. This would especially true in lower end homes that would typically appeal to first time homeowners. And this would be the market we would be looking at.
Is it too late or at least poor timing for investors who are looking to buy low, fix up, and flip rather than hold as rental properties?
Just depends on price vs. demand. Yes, if the $8000 tax credit is gone, home sales will slow. I was just thinking about this, still looking around Los Angeles. For the life of me, I could not figure out why homes keep selling at inflated prices. And then it hit me. Even though the $8,000 tax credit is a very small percentage of a $400K house, it gets people in who can't save a dime via FHA. Basically people are playing with funny money to an extent.....so while a normal loan they can afford might be $360K, they will bid $400k when it's just an extension of credit.
So what I think will happen if the housing credit dissapears is that demand and prices will drop. Now whether the credit is extended...that I don't know. What I do know is that the October elections will have some impact on that.
However if you can get some great deal on a fixer or something, you may still be able to make a profit.
My mistake. I thought we were still talking about buying investment properties.
it could well be for investment when we move out of it subsequently if we have to relocate again in the next couple of years. my plans are so fluid right now...
when people talk about investment properties here...is the focus more on capital appreciation or rental income or both? i notice that the rent is so low now (poor rental yield)....i almost couldn't believe what i could rent with less than 900 bucks..and the landlords were all vying for our signatures on the contract by dangling all sorts of carrots! and all these rental scams...i've already heard of 2 tenants not having paid rent for the whole year when i went to view 2 foreclosed properties just a couple days ago. sounds like rental income is hard to earn these days....
You know I don't think they changed the rule that you have to own the house for three years otherwise there is payback for the tax credit. There are a few exceptions such as military relocation and work relocation.
I mainly work with investors. For the past couple of years I've wanted them to buy & hold. In general, that's been the way to go. However, each deal must be reviewed on it's own merits. Simply put, the numbers are either there or they are not.
In the Colorado Springs market I don't see that the 1st buyer's credit has held prices up but it has prompted people to buy. But remember the C/S market softened - never really crashed as it did in some parts of the country. All real estate is local. In more direct response to the OP - I do expect a final push for closings right before the buyer's credit expires. However, I certainly do not expect the local market to "take a huge hit" once the buyer's credit is gone - the local numer's just don't support a suggestion that prices will turn down.
Right now - I'm seeing great bargains in high end houses - "million dollar" homes can be purchased for far less than a million dollars! A savvy investor could do very well.
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i'm currently still renting.
