Vacant Lots Become Hot Property

Vacant residential lots are looking better and better to real estate investors. The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand.

“The country needs 1.2 million new units for the next 10 years just because of population growth,” says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. “[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant.”

FHA Relaxes Anti-Flipping Rule

Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days. The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.

Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.

FHA’s change “is going to be absolutely terrific” for first-time home buyers hoping to take advantage of the tax credit, says Bobby Taylor, an associate with Coldwell Banker Mountain West Real Estate in Salem, Ore.

Wealthy Investors Are Eyeing Real Estate

The wealthier the investor, the more money they plan to put in real estate compared to the amount they have earmarked for stocks and bonds, according to Barclays Plc global survey. Investors believe real estate will yield better returns.

Twice as many people with more than $800,000 to invest plan to increase their investment in commercial and residential property compared to those who plan to reduce it, Barclay’s study reported.

Overall, investment in real estate among wealthy individuals is set to rise to 30 percent of the average portfolio from 28 percent now, according to the survey. That excludes properties used as a principal residence.

Housing a Good Investment in 2010

Forbes housing reporter and analyst Francesca Levy makes some thought-provoking predictions in the latest issue of the magazine.

She predicts:

* Real estate will be an attractive investment strategy in 2010 with wealthy investors devoting an increasing segment of their portfolios to it.
* Loan modifications will result in more people who should probably be facing foreclosure slipping deeper into debt.
* Cities like Omaha, Neb., and Buffalo, N.Y., which avoided the housing bubble and most of the bust, will be models for cities trying to avoid another bubble.
* Financial troubles in Dubai will ripple through the U.S. luxury market, creating energy in a market that has been stagnant.

Declining Dollar Brings Foreign Investors

Falling prices for real estate and the declining value of the dollar are luring investors from all over the world to purchase properties for as little as half what they might have paid four years ago.

“This could be a once-in-a-generation opportunity for real estate investment,” says Arthur Wong, whose Calgary, Alberta-based U.S. Real Estate Fund has invested $5 million in properties in the U.S. Southwest and plans to buy millions more.

Buyers from countries like Brazil, Canada, France, and the Netherlands, whose currencies are particularly strong against the dollar, are spending millions on luxury condos in New York City, Las Vegas, and Miami. Foreign buyers also find the warm climates of California, Texas, and Arizona attractive.

Peter Zalewski, a principal with Miami-based Condo Vultures, says he has sold foreign condo buyers seven bulk deals in downtown Miami alone, with investors coming from Argentina, Canada, Colombia, Italy, Norway, and Venezuela.

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