In the past year the mantra "it’s a great time to buy" has been repeated countless times by real estate agents and brokers throughout the country — and it appears a portion of them have heeded their own advice.
However, the types of properties that real estate professionals buy and the strategies behind the purchases can vary widely.
For some, such as Carl Williams, the volume of single-family, distressed properties on the market represent an opportunity to purchase significantly reduced-price homes as a personal investment.
Market breeds new landlords
Williams, who is a broker and chief executive officer for the Saturn Group in Detroit, has purchased two distressed properties this year for less than $10,000 apiece. He performed rehabilitation work on the homes and has since rented them out.
Similar to Williams, Mike Rosen, an agent with Frankly Real Estate Inc. in Fairfax, Va., closed escrow on a distressed townhouse in February, performed renovation work, and recently put the property on the rental market.
"It’s the second one I’ve purchased in the same neighborhood," Rosen said, adding that he plans on keeping both properties as rentals for at least five years before he considers possibly selling them. "I’m looking for positive or breakeven cash flow (by renting the properties)."
Rosen didn’t rule out the possibility of purchasing another property within the year, as he’s anticipating further price softening in the Fairfax area heading into the summer.
Investing in their own future
Purchasing a distressed home for investment purposes appears to be agents’ main reason behind buying such a property, regardless of state.
According to Frank Schulte-Ladbeck, a professional home inspector in Houston, since November 2008 he’s experienced an increase in agents who have requested that he inspect a bank-owned home (also known as an REO property) for them.
"Out of the Realtors I’ve dealt with, the majority are buying the properties as investment properties," Schulte-Ladbeck said.
Iverson Moore, a spokesman for the National Association of Realtors trade group, stated that many NAR members are interested in buying homes as investments when the terms are attractive — as they are now in many local markets for those who can qualify for a loan.
On the flip side, some real estate professionals got burned buying properties as an investment during the gravy train days of fast-rising prices — and got stuck with them as the market turned and prices headed south.
Bob Foust, of Fullerton, Calif.-based Foust Team Real Estate, said he tries to purchase a property each year, regardless of overall market conditions.
"I mostly stick to condos," Foust said, adding that in early May he put an offer in for a bank-owned condo.
Foust said location is most important factor for him in purchasing investment properties, as a good Orange County, Calif., location will positively affect its long-term value and the amount of rent that can be charged.
"The renters will pay for the property for you. Once you get it paid off you can keep renting it out. It’s like retirement money," he said.
Buying to occupy
While many agents and brokers now purchasing properties are doing so as an investment, there are also agents and brokers who are buying homes to live in. …CONTINUED
Frank Borges LLosa, principal owner and broker of Frankly Real Estate Inc., said he has been trying to buy a personal residence for at least four months.
The home he’s currently eyeing is a "regular overpriced" home that isn’t bank-owned, he said.
"I’m looking for a place to live for the next 20 years. I’m not an advocate of buying just as an investment," LLosa said, adding that he married a year ago and has since been looking to upsize.
Working with a significant amount of clients who were eying distressed properties motivated Erion Shehaj, owner of Signature Real Estate in Houston, to purchase a single-family, bank-owned home as a primary residence.
Since then, Shehaj has considered joining the group of agents who are purchasing distressed properties and renting them out as an investment.
"I wouldn’t exclude looking at acquiring additional property because I don’t think this (Houston) foreclosure market will last much longer," Shehaj said, adding that Houston homes that enter the rental market are typically occupied in less than a month.
Of the agents and brokers contacted, all but one — LLosa — found and purchased their investment properties or homes without the use of another agent.
"The main decision-maker should never be the first point of contact. There should be an intermediary," LLosa said.
Managing clients, self-interest
The other agents and brokers contacted all insisted that finding a property and completing the transaction process, while also meeting the needs of clients they were working with, didn’t represent a juggling act for them.
"It’s just one more deal we’re working on," Shehaj said.
Another issue is whether agents can fairly represent the interests of their buyer clients while they are also shopping around for their own investment properties.
While those agents and brokers who buy properties are playing a role in the market’s overall recovery, Foust said there are even more agents who currently want but don’t have the ability to purchase property.
"The problem is it takes cash and a lot of agents don’t manage money well — they’re no different than regular people," Foust said. "They were buying property when you could get 100 percent financing but now they can’t get back in the market."
Erik Pisor is a freelance writer in California.
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