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Investors Rush In

In love, they say, fools rush in. In the Twin Cities real estate market, right now, investors are rushing in!

It is the dark of winter (literally) here in Minneapolis, MN. There are 13.44 homes for every one buyer, in the Twin Cities metro area, more than ever before. It's hard to find buyers looking for a home this time of year, folks are either out of town, hosting guests, or headed to the gym. But, in the residential rental segment of the market, things are hotter than a yule log.

I'm headed out to look at duplexes with a client today. We were only able to see 5 of the 8 properties we wanted to, the other 3 sold before we could see them. Many of the properties are back owned, and need some work, but the prices are very attractive. Too good it seems to pass up.

Another colleague of mine, looking for an investment property, has been in 6 multiply offers in a row.

The investment market has heated up and for good reason. Rental income wasn't able to cover monthly expenses for most rental properties for many years. Investors were banking on the appreciation and tax benefits. But as the market slowed (late 2005) and appreciation gains were in questions, investment property values declined. Investors naturally started valuing cash-flow more.

Given the last two years of market correction, the credit crunch, and rise in foreclosures, two things have happened. First, there are more renters on the market, and more importantly, prices have come down to the point where many properties will cash flow. And, *SNAP* the investors rush in!

As we head into 2008, investor activity will surely reduce a good deal of inventory (albeit in a very specific sub-set of the market), but there is sure to be a flood of new listings as we head into spring. The balance between supply and demand, currently the market's dominating factor, will determine how soon the "recovery" begins.

Posted by AQUATERRA PARTNERS Todd Shipman, Jeanne Larson, Ben Kolkman on 12/28/2007 09:47 AM

Comments (9)

investors, rental property, buyers market, foreclosure, home values, minneapolis real estate market, real estate market

This post has been included in Minnesota Information Hennepin County, MN Information Minneapolis, MN Information

9 Comments on Investors Rush In

Ben-

Interesting post. I have an investor, new to the market, who just wants to steal everyting. This information will help.

12/28/2007 09:51 AM

by Tim Ross (Re/Max Associates Plus)

The old saying is that "when the market hits bottom, the bottom feeders (investors) rush in.

Interesting.

12/28/2007 09:59 AM

by Lenn Harley, Homefinders.com, MD & VA Real Estate

Not unlike the 'buy low, sell high' outlook on stocks. If the rental market is robust, that's great. In my area, the rental market is somewhat soft, too.

12/28/2007 10:03 AM

by Robert Smith (Preview Properties)

Tim - Investors should look to "steal" as there are deals out there to be had. But they also need to know just how hard it can be to get that deal once you have found it for them. Make sure your buyer is ready to write an offer immediately, so when you've found a deal, they are in position to act.

Lenn - "Bottom feeders" or angel's of mercy to many home sellers. Very interesting!

Robert - The rental market is only strong when it makes dollars and cents to buy rentals, think cash flow/appreciation/tax bennies, in that order.

THANKS GUYS! - Ben

12/28/2007 12:27 PM

by AQUATERRA PARTNERS Todd Shipman, Jeanne Larson, Ben Kolkman (SKY Sothebys Int. Realty, Minneapolis, Minnesota)

Agreed. It's true that if you do the opposite of what everyone else is doing it will probalbly make you some money. Consumers are not buying retail from Realtors and MLS so much right now. Investors are making a killing while getting great equity positions.

I for one am one of those bottom feeders now and I am anything but hungry.

12/28/2007 05:36 PM

by Jason Wheeler (REI Capital Solutions Group)

Great blog, I have had several calls lately asking to get preapproved to by investment properties. Lets hope this is a postive trend.

01/08/2008 05:56 PM

by Scott McKay (Lakeland Mortgage Corporation)

Great post Ben! I have seen the real investors starting to make their way back into the market in Arizona as well. High inventory, low prices and low mortgage rates make for a winning combination when it comes to generating cash flow through real estate investments. Canadians and Europeans are really starting to see the value of real estate investments in the United States as well because of the strength of their currency. And, with foreclosures expected to continue to increase the rental market has nowhere to go but up.

01/30/2008 06:49 AM

by Bonny Puckett ~ REALTOR ~ Fountain Hills, Scottsdale, AZ (Call Realty)

Bonny - Great comment (thank you!) - A couple from London recently worked with me, due to the weakness of our dollar, they could buy twice the real estate they could have in years past.

I don't think this cherry picking will actually help the market go up, it helps reduce inventory, and gets sellers out of trouble, but the average rate of appriciation won't be greatly effected. These deals tend to be at the bottom of the value spectrum, and in fact drive prices down, but they also take inventory of the market, reducing supply, and that tends to raise prices.

Long story short, it's a great time to buy, if your an investor, you'll find a bargain, if your looking for "home" you'll find a true gem, (and you might even be able to think it over before buying it!)

Cheers - Ben

01/30/2008 07:57 AM

by AQUATERRA PARTNERS Todd Shipman, Jeanne Larson, Ben Kolkman (SKY Sothebys Int. Realty, Minneapolis, Minnesota)

Great post. I hope you do an updated one this season.

Please take my Mn. Landlord Poll if you haven't already: http://snappoll.com/poll/290452.php

Thanks,

David

09/04/2008 11:41 AM

by Minnesoat Landlord Association MN (MNLANDLORD)

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