"Superior investors know--and buy--when the price of something is lower than it should be. And the price of an investment can be lower than it should be only when most people don't see its merit." - Howard Marks, Chairman and co-Founder of Oak Tree Capitol Management.
Mega property investors, Blackstone Group LP (BX:US)
, are just one of many who are accumulating properties by the thousands. Blackstone, the world's largest private equity firm, has taken advantage of record low mortgage rates by investing 1.5 billion dollars on 10,000 foreclosed properties in this year alone. Foreclosed properties have become the diamond in the rough for many investors and property management firms. As homeowners and investors alike are gaining confidence again, a shrinking supply of homes for sale has led to greater competition among buyers. The opportunity for funds to purchase singe-family homes at a distressed value could last less than two to three years, says Jonathan Gray, global head of real estate for Blackstone at the Bloomberg Commercial Real Estate Conference in New York on Tuesday. Home owners and buyers will once again face a competitive market on the upswing. Not only are properties more affordable than ever, but prices have been steadily increasing for the past seven consecutive months. So why are large investment firms seeking foreclosed properties instead of purchasing by owner? Rather than purchasing foreclosed apartment buildings or condominiums, firms are seeing more opportunities in the cities hit the hardest by the recession. Cities like Las Vegas, Atlanta, and Phoenix are showing signs of rebounding. As a result, smart investors are targeting the most distressed markets since they have the greatest opportunities for growth as the 2-3 year window closes. Many neglected properties in poor condition are deemed undesirable (and out of budget) to invest in by the average home buyer. But investment companies are using this opportunity to revamp properties in poor condition and rent them out. With new home construction still lagging and the demand for new homes increasing, you, as a potential future buyer, will face more competition over less inventory as the "great recession" comes to a close.