Investors are back!

For the past few years, it's been tough for investors of HUD and REO properties. HUD provides priority to occupant sales during the initial bidding period, so even if an investor were to outbid an owner-occupant's offer, the occupant would be awarded the property. The purpose according to HUD is that this provides for community stabilization. The assumption is that investment properties often wind up with renters degrading neighborhoods. However, there is a need for all types of housing, including rentals. If investors can sell the property, they usually do. So I am not convinced of HUD's argument. These days, few neighborhoods seem stable.

The lower priority status HUD assigns to investors is not the only stumbling block to their success, although I have never heard an investor complain about this. Besides, an investor can purchase bank-owned properties instead, with no such restrictions. Investor-owned properties no longer need the 90 day "seasoning" in order for their buyers to obtain an FHA loan to purchase the property. That's good news. But the days of double-closing flips seem to be gone. In addition, most lenders are not allowing home equity loans and refinancing for investors immediately after fix-up. In the past, the equity from one property could be quickly parlayed into the investment for the next, a get-rich-quick strategy for many investors. It is hard to fault anyone playing that game, since it was well within the law to do so, and a well known strategy promoted by many motivational business speakers.

It is still a tough market, no doubt about it. But at least in the case of the DFW market, HUD investors seem to have risen from the dust. Of today's 66 HUD properties shown on our site as sold, half were sold to investors. This is a growing trend that seems to have started since April. Coincidentally, that is when the stimulus recovery funds for owner-occupant home purchases ran out. Apparently it did have an affect, pulling in residential sales that otherwise may have been put off. Now that the tax credit is history, we see that residential occupant sales are fewer and investors are taking advantage of that. And being able to hold ten properties again under financing, rather than only three helps alot, especially in markets where homes are on the market for longer periods. Hopefully, reason will prevail to allow capital flow for these entrepreneurs and small business owners, some who do this because the economy did away with their previous job. Good for them! Are there any investors out there with an opinion? Do you see things looking up for you?