OAKLAND, Calif. — Real-estate investors have become a potent force in a moribund housing market, accounting for more than one-fifth of transactions in the San Francisco Bay Area over the past 12 months, according to real-estate data.

Despite record low interest rates, many consumers simply don’t have enough confidence in their economic outlook to buy houses. Investors have kept prices from falling further, real-estate experts say.

“The market would be quite a bit sicker were it not for investors snapping up a lot of the properties,” said Andrew LePage, analyst at DataQuick real-estate service. “They account for a meaningful portion of the demand. To the extent to which there’s at least a temporary floor under this market, they’ve helped to build it.”

Almost half of the Bay Area homes purchased on the open market are distressed — either bank-owned foreclosures or short sales being sold for less than the mortgage. Often these properties suffer from deferred maintenance, making them challenging for an owner-occupant.

Investors play a valuable role in buying and rehabbing such properties and then reselling or renting them out, said Jeff Weissman, a Realtor with Highland Partners/BHG in Oakland. “They clear out inventory and then bring it back on the market in move-in condition, thus improving neighborhoods and giving opportunities to first-time homebuyers,” he said.

Not everyone is enthusiastic about investors. Other homebuyers complain that they get muscled out by deep-pocketed investors who can pay all cash, LePage said.

Sellers prefer cash offers because they’re quick, clean and guaranteed to close. Community groups worry about investors turning into slumlords as they manage fleets of rentals.

Some of investors’ bad rap stemmed from boom-time flippers, who capitalized on a rapidly rising market.

“There is a huge difference between speculation and investing,” said John Robin, a Realtor with BHG/Mason-McDuffie in Berkeley. “Until 2009, most (non-homeowners) buying real estate here in the Bay Area were speculating on appreciation. What an investor does is look at what a property will cost now to purchase and operate, and look at the return every month. If one day they can sell it and make a profit, that’s even better.”

He sees more investors becoming landlords, although there are still plenty of flippers.

With prices continuing to soften, more “ordinary people” are getting involved in real-estate investing, since the barriers to entry are lower, Robin said.

“The biggest growth area is first-time, small investors,” he said. “These are people who may have cashed out (other investments) that they want to put into real estate. Some people use self-directed IRA money to buy real estate. Sometimes it’s families who pool their money together or individuals who have jobs and do this to supplement their income.”

The Obama administration implicitly recognized investors’ value in the marketplace this summer when it called for proposals from investors and others on how to buy, rehab and rent out the legions of foreclosed properties owned by Freddie Mac and Fannie Mae.

But investors are not a single monolithic entity. They come in all types, from the mom and pop who buy a couple of rentals to fund their retirement, to the professionals who deal in dozens of homes a year as a full-time occupation.

Pete McDonough of Pleasanton, Calif., had a secure, well-paying job in sales for a technology company.

But three years ago when he realized how many bargain homes were for sale in the Bay Area, he switched to full-time real-estate investing.

“In a horrible job market, I quit a good job,” he said. “I’ve considerably exceeded my previous salary and I haven’t looked back.”

He had dabbled in buying rental properties for some time, but not in California, where high prices meant it was impossible to rent them out for enough cash flow. But the real-estate downturn made the Golden State much more affordable.

He partnered with Andrew Wilson, who had a background in kitchen and bathroom design, and David Rosen, a real-estate broker. The three put up cash and also attracted some investors. Today they operate a $5 million fund.

Most of their efforts go to buying, fixing and flipping, but they also maintain a small stable of rentals.

Article source: http://seattletimes.nwsource.com/html/realestate/2016682817_realinvest06.html

Despite record low interest rates, many consumers simply don’t have enough confidence in their economic outlook to buy houses. Investors keep some properties – especially ones that need extensive work – from languishing unsold for months and have kept prices from nose-diving further, real estate experts say.

“The market would be quite a bit sicker were it not for investors snapping up a lot of the properties,” said Andrew LePage, analyst at DataQuick real estate service. “They account for a meaningful portion of the demand. To the extent to which there’s at least a temporary floor under this market, they’ve helped to build it.”

In addition to homes sold through the multiple listing service, an increasingly large share of properties at courthouse-steps auctions – the final stage of foreclosure – are being bought by investors. Some 5,243 properties were purchased by nonbank entities in the 12 months ended in September, according to ForeclosureRadar.com.

Almost half of the Bay Area homes purchased on the open market are distressed – either bank-owned foreclosures or short sales being sold for less than the mortgage. Often these properties suffer from deferred maintenance, making them challenging for an owner-occupant.

Investors play a valuable role in buying and rehabbing such properties and then re-selling or renting them out, said Jeff Weissman, a Realtor with Highland Partners/BHG in Oakland. “They clear out inventory and then bring it back on the market in move-in condition, thus improving neighborhoods and giving opportunities to first-time home buyers,” he said.

Not everyone is enthusiastic about investors. Other home buyers complain that they get muscled out by deep-pocketed investors who can pay all cash, LePage said. Sellers prefer cash offers because they’re quick, clean and guaranteed to close. Community groups worry about investors turning into slum landlords as they manage fleets of rentals.

Some of investors’ bad rap stemmed from boom-time flippers, who capitalized on a rapidly rising market.

“There is a huge difference between speculation and investing,” said John Robin, a Realtor with BHG/Mason-McDuffie in Berkeley. “Until 2009, most (non-homeowners) buying real estate here in the Bay Area were speculating on appreciation. What an investor does is look at what a property will cost now to purchase and operate, and look at the return every month. If one day they can sell it and make a profit, that’s even better.”

He sees more investors becoming landlords although there are still plenty of flippers.

With prices continuing to soften, more “ordinary people” are getting involved in real estate investing, since the barriers to entry are lower, Robin said.

“The biggest growth area is first-time, small investors,” he said. “These are people who may have cashed out (other investments) that they want to put into real estate. Some people use self-directed IRA money to buy real estate. Sometimes it’s families who pool their money together or individuals who have jobs and do this to supplement their income.”

The Obama Administration implicitly recognized investors’ value in the marketplace this summer when it called for proposals from investors and others on how to buy, rehab and rent out the legions of foreclosed properties owned by Freddie Mac and Fannie Mae.

But investors are not a single monolithic entity. They come in all types, from the mom and pop who buy a couple of rentals to fund their retirement, to the professionals who deal in dozens of homes a year as a full-time occupation. Here are profiles of three types of real estate investors currently looking in the Bay Area.

Professional

Article source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/29/BU411LMJIV.DTL&type=business

A real estate source I knew recently told me about a guy he knows in Atlanta who has been hired by several different banks to winterize their REO’s (real estate owned, i.e. the bank-owned foreclosures).

The homes are abandoned and empty, and clearly the banks think they’re going to stay that way for a while.

The winterizer didn’t want to do an interview, for fear he would lose his clients, the banks, who might not want us all to know about this.

A new study by an economist at the Cleveland Federal Reserve finds today’s foreclosures stay vacant far longer than the historical norm. Studying one Ohio county, Stephan Whitaker found, “foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.” The higher the poverty rate in the area, the longer the property stays vacant.

Foreclosed homes obviously lower the value of surrounding homes, but Whitaker says the damage can go on much longer than we might think. “The data suggest that foreclosure may permanently scar some homes,” he writes in his research.

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