Vulture investors move from flippers to landlords in down market

a turkey vulture with a huge wingspan in flight

Vulture investors are taking advantage of depressed home prices and securing long-term profit by renting, instead of flipping. mikebaird/Flickr photo.

Vulture investors are feasting on the depressed U.S. housing market. Deflating home prices, rock-bottom mortgage rates and a rental market surging with people who have lost their homes are attracting swarms of vulture investors who are after distressed properties. But in this weak U.S. economy, their strategy is changing. In boom times, vulture investors were home flippers looking for quick cash. In these troubled times, they are landlords raking in hefty, steady incomes.

Vulture investors swoop down on dead housing market

Vulture investors get their name because they swoop down and buy distressed properties on the cheap. CNN reports that places wracked with foreclosures and short sales like Las Vegas, Phoenix and Miami are popular because home prices there have dropped as much as 70 percent. Vulture investors used to be known for flipping often and helping to bid up home prices to unsustainable heights. Now they consider potential rental profits, a far more stable, long-term investment these days. Vulture investors today may actually be helping stabilize neighborhoods.

Vuture investing changes strategy

Several factors presently occurring in the U.S. housing market have changed vulture investing strategy from buyer and seller to buyer and landlord. Mortgage resource HSH.com said ever-rising home prices, the meal ticket for house flippers, are a distant memory. It no longer works out to buy cheap and sell cheap. Plus, millions of foreclosed borrowers have to wait years before they can buy again have no choice but to rent, often from vulture investors who bought the properties for pennies on the dollar.

Vulture investing: the cash flow advantage

Vulture investors that pay in cash can start making money from the first month they start renting the homes. The CNN article uses Las Vegas as an example, where prices have fallen about 70 percent and rents have only declined about 20 percent. Las Vegas vulture investor Glenn Plantone told CNN he is getting cash flow, or net return on investment, of 12-to-14 percent. The advantage of cash flow is that even if real estate prices decline further, the money coming in stays the same.

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