For around $4.7 million, you might be able to snag one gleaming, top-of-the-line luxury home in a top market. In Michigan's Macomb County, though, it bought one man 627 homes.
Bill McMachen, who owns a yacht dealership in Harrison Township, Mich., bagged that bulging real estate portfolio after accepting an enticing offer by Macomb County's treasurer: One buyer could acquire all of the county's foreclosed properties if they just paid the amount equal to all of the taxes owed on them -- $4.72 million.
To the chagrin of hundreds of other investors lined up at the tax sale to bid on distressed properties, McMachen offered that sum at the county's annual foreclosure auction on Tuesday, snapping up the county's inventory at what some might consider a nearly absurd discount. Other investors said that they had planned on buying the properties in bundles but, evidently weren't positioned to place a bid on all 627 at once.
One investor told Detroit TV station WJBK that he was ready to bid three to four times higher on some of the properties that McMachen bought -- homes for which McMachen paid an average of about $7,500 apiece.
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McMachen may turn around and sell his properties in packages of 10 or so to some of those very investors. He said that he intends on selling them for about 15 percent below their appraised value and that he expects to rake in a total of $10 million doing so.
"I've got, like, 400 houses, and I've got a list of, like, 600 people who want to buy them," he told AOL Real Estate.
Why so many suitors? Like investors all over the country, they may want to get in on the single-family-rental game.
The business plan is simple. Buyers purchase foreclosed homes and convert them into single-family rentals. With repossessed homes coming dirt cheap, and rental rates climbing, some believe the potential profit to be huge.
All in all, these sorts of deals are usually a win-win, said Ascala Sisk, senior manager for community stabilization at NeighborWorks America, a nonprofit whose affiliates around the country help convert foreclosed homes into affordable housing.
Vacant homes drag down property values, and if they are allowed to deteriorate, they put neighborhoods at risk, she said. So assuming that they are maintained and "put back to productive use," the sell-off of McMachen's 627 properties would be a positive thing, she said.
"It can be a mutually beneficial arrangement. It can be profitable to the investors, and at the same time, it's a positive influence on the community," she said.
Macomb County Treasurer Ted Wahby told AOL Real Estate that the sale enabled his county, which is part of the Detroit metropolitan area, to sell the good with the bad and garner all the taxes it's responsible for collecting -- something that he said usually isn't possible.
In addition to selling to investors, McMachen said that he may donate the most run-down properties to charities and even sell a few to Detroit residents trying to move to the suburbs.
"I'm going to give them a little priority," he said of the latter group. "I'll do that kind of stuff for the community."
Counties like Macomb regularly auction off foreclosed properties in the hope of recovering the taxes owed on them, Wahby said. He added that counties only take over foreclosed properties if the lender who held the home as collateral decides it's not worth paying off the taxes owed on it.
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