Professional Investors Move Into Flipping Foreclosed Homes
Hoping there are big profits to be made in the aftermath of California’s housing collapse, professional investors are flocking to the business of buying foreclosed homes at distressed prices.
The investors, primarily private equity funds and groups of wealthy individuals, purchase the homes at public auctions, which are held daily on the steps of local courthouses. They refurbish the properties and try to sell them for quick profits.
Not long ago, the typical home flipper was an amateur tapping a home equity line or savings for an investment property. But professionals have rushed in, partly because of sparse investment opportunities elsewhere.
“In crisis there’s opportunity,” said Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine. “Right now there’s huge opportunity with flipping houses.”
Closely watched gauges of professional buying have surged over the last two years.
The number of homes sold at foreclosure auctions statewide increased to 4,336 in April, from 884 in January 2009, according to research firm ForeclosureRadar. It eased back to 3,483 in July as banks offered fewer properties for sale. The auctions are dominated by professional investors who shop with cash (although not usually with actual greenbacks, for practical reasons).
Another measure, the percentage of all homes sold to absentee buyers, paints a similar picture. In the hard-hit Inland Empire, for instance, 30% of all homes sold in April went to absentee buyers -- up from 19% at the end of 2008 and the highest level in at least seven years, according to San Diego research firm MDA DataQuick. It was at 28.2% in July.
