Foreclosure Frenzy Moves from Las Vegas to Atlanta

As Las Vegas foreclosures ground to a near halt after the passage of AB 284, Sin City passed its long-held foreclosure capital crown to Atlanta.  It seems Las Vegas may have sent its corporate buyers to the Georgia capital as well.  Atlanta now leads the country in foreclosures and private equity firms have definitely noticed.  Investment groups like Blackstone Group LP and Colony Capital are sending armies of representatives to Atlanta to purchase properties.  These groups specialize in purchasing single family homes, renovating them, and placing renters in the properties.  This is the same formula Team Plantone has been using in Las Vegas for the last three years.  The major difference lies in the return generated for investors.  We have been able to return double digits consistently for our investors in most cases, where these large capital groups are satisfied with returns of 6% on their investment capital.  As a result, the equity firms that are descending on cities like Atlanta are willing to pay much more for foreclosure properties than their private money competitors.  Peter Horbulewicz, a house flipper in Georgia, commented, “If you go head to head with them, they always win, because they always overbid.”

This drama that is now unfolding in Atlanta has already been played out in Las Vegas and Phoenix where the upward buying pressure exerted from institutional money has raised home prices by 20-30% in these cities.  Private equity groups are able to pay retail for home and still make their desired 6% returns because the gap between the cost to own and the cost to rent is near the highest it’s been in decades in cities like Phoenix, Atlanta, and Las Vegas.  In Phoenix, renting a house was 49% more expensive than owning in August according to Trulia.  In Atlanta, renting was 57% more expensive.  The numbers were slightly lower for Las Vegas, but along the same lines.  The large premium paid for rentals is being caused by a huge increase in demand for rental properties as displaced homeowners, who can no longer purchase a home after credit issues, seek rental properties.

It remains to be seen how this saga will play out across the country.  Some experts believe that the rise in home prices brought about by institutional investing will be temporary if the broader economy does not improve significantly over the next year or two.  Regardless, one thing is certain, rental housing will be in considerable demand for the foreseeable future.  Now is the time to buy in Las Vegas, but the purchase must be prudent, and the buy price must generate cash flow.  If you are interested in investing in Las Vegas real estate or foreclosures and would like guidance to make sure your purchase is financially sound, contact the experts at Team Plantone.  We’ve been guiding Las Vegas investors successfully for years and we are eager to help.