There was this very interesting article about “Vultures”, those investors who buy up very cheap property and fix them up. This article centered on the Phoenix market.

On its face, vultures are a bad thing. They are doing well because somebody lost their home to foreclosure. One could argue that if too many of them are just doing fix n flips, then they will just drive the market back upward needlessly (and possibly flood the market with bad renovations).

The other perspective is that, just as in the wild, they are part of ….. (wait for it) …..the circle of life.

So, you have this home that was on the market in 2007 for $300,000. In the process of foreclosure, it was beat up and damaged. It was sold to a vulture for $100,000. They come in and fix it up at a cost of about $30,000.

As the article points out, many vultures are fixing and sitting, rather than fixing and flipping. This can be a stabilizing thing. If they fix and flip at $150,000 that can be good if (1) they did a good job at the renovation and (2) some family gets a like-new home. Its much better for the neighborhood than a home sitting empty.

But it is equally good if they fix the property and get somebody in to it for the long term. This means they are not driving prices recklessly upward. It also means some stability in the neighborhood. It all depends on who they rent to, I guess.

It all moves us back to a stable market.

I think you will see more of this going on, even in the condo market.

Well, you decide if you think it is good or not. I don’t think this story is over, though.

Written by phxAdmin