Foreclosure Investors Prepare to turn Foreclosure Properties into Rentals

As the real estate market continues on, hobbled by far too many foreclosure listings on the market without enough qualified buyers to buy them, many foreclosure investors are getting excited about the opportunity to turn some of these home foreclosures into lucrative properties – like rentals.

The rental market has become red-hot over the past year because so many people are moving around the country looking for work – and do not want (or can’t afford) to buy a house. Hence, demand for rental properties has gone up while existing home sales have continued to waver.

Because of this combination of factors, the government’s plan to turn over 180,000 government foreclosures into rental properties through private investors and private equity firms is now taking place and will be implemented in force this year.

Right now, pre-qualification applications are being accepted by the Federal Housing Finance Agency, the regulator in charge of Fannie Mae and Freddie Mac and the administrator of government foreclosures. These pre-qualifications allow interested investors to save time with the process so as many properties can be purchased and converted into rentals as possible.

Where, exactly, are the hot markets for these foreclosures? Two of the top states for government foreclosures are California (with 9,000) and Georgia (with 6,400). In the state of Georgia, though, the city of Atlanta has by far the most, with almost 4,600 properties owned by the federal government. Other hard-hit cities, like Phoenix and Las Vegas, contain smaller yet still-substantial amounts.

Metro Atlanta in particular needs this program because housing prices have continued to fall. The latest data indicate that November 2011 was the fourth consecutive month of home value decreases in the city, comparable to many other metro areas throughout the country. One reason: The number of people moving to Atlanta every year has been cut almost by two-thirds over the past few years as jobs have shriveled up and unemployment has risen. The same story applies elsewhere, like with Phoenix, Las Vegas, and other metro areas in the Sunbelt.

The beginning date of the program is not clear, but all signs indicate that the government will begin the process in force sometime this quarter, or early next quarter at the latest. The upcoming elections in November will prevent the Obama administration from taking too long to initiate what it believes will be a major part of any successful housing solution in the future.

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