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BUILDING WEALTH LOCALLY
Given that most foreclosure auction
buyers are small, often local, real estate
investors—a February 2020 Auction.com buyer
survey found that 76% of buyers purchased
five or fewer properties in 2019—selling
at the foreclosure auction has the added
neighborhood stabilization benefit of providing
a wealth-building opportunity for local
entrepreneurs who will likely invest back into
the community.
"I'm looking for a way to make homes
more affordable because I've seen these homes
become more out of reach for many," said
Michael Johnston, owner of New Orleans-
based Rehab2Home Properties, which buys
and rehabs distressed homes, many located
in low-income Opportunity Zones. Johnston
grew up in the area and wants to give back to
the community while building wealth. "I used
to ride my bicycle through the neighborhood.
… I am all for helping my community, but I
can't do it for free."
Johnston is primarily employing the hold-
as-rental investing strategy for homes located
in Opportunity Zones, given that the program
requires investors to hold properties for at least
10 years to receive the full tax benefit.
"If you're willing to buy a property and
hold it for 10 years or more, then the capital
gains tax you would pay on a sale would
actually disappear," Johnston said, adding that
he believes the neighborhoods he's investing
in could see more rapid appreciation over the
next decade as a result of being designated as
Opportunity Zones. "If I build (and rehab)
enough homes in these areas, and other people
join in, what could happen in 10 years? We'll
see."
Daren Blomquist is VP of
Market Economics at
Auction.com. In this role,
Blomquist analyzes and
forecasts complex macro- and
microeconomic data trends
within the marketplace and greater industry to
provide value to both buyers and sellers using the
Auction.com platform. Blomquist's reports and
analysis have been cited by thousands of media
outlets nationwide—including all the major
news networks and leading publications such as
the Wall Street Journal, the New York Times,
and USA TODAY. Blomquist has been quoted in
hundreds of national and local publications and
has appeared on many national network
broadcasts, including CBS, ABC, CNN, CNBC,
FOX Business, and Bloomberg.
This analysis
implies that
cash-buying
real estate
investors are
better than
mortgage
servicers at
efficiently
getting
formerly
distressed
homes into
the hands
of owner-
occupants.
