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.
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.
Of the 75 largest U.S. cities in the first quarter of 2012, Toledo recorded the highest rate for homeowner vacancies, at 5.6 percent. However, in three of the past four quarters listed by the Census Bureau, that rate has hovered between 3 and 3.6 percent, significantly bringing down the city’s 12 month average, and its overall ranking in this list. Regardless, the 3.8 percent 12 month average still ranks Toledo as the fifth highest in the country for homeowner vacancies alone.
It’s no secret that the Florida real estate market has seen better times — and the situation in Tampa appears to be getting worse. In May, RealtyTrac reported that foreclosure activity in the Tampa-St. Petersburg-Clearwater area rose by nearly 111 percent from May 2011, with one home in every 304 in foreclosure. The rental vacancy market has been following this downward trend, with the rental vacancy rate going up or remaining flat every quarter since the beginning of 2011.
Houston is home to the nation’s third-highest rental vacancy rate over the past 12 months, standing at 15.5 percent. The city hit a three-year high for rental vacancies in 2009, when the rate rose to 18.4 percent in the third quarter of that year, according to Census Bureau data. However, Houston’s homeowner vacancy rate has been recovering, dropping below the average for the 75 largest cities for the past three quarters to as low as 1.1 percent at the end of 2011.
Atlanta’s average homeowner vacancy rate is the third-highest among major U.S. cities, standing at 4.2 percent. Fortunately for Atlanta, the rate has been dropping since early 2011, when it stood at 5.4 percent. The trend for rental vacancies has been worse for Atlanta, however, rising from 9.4 percent in the third quarter of 2011 to 12.4 percent in the first quarter of 2012.
Over the past five years, the Las Vegas housing market has experienced one of the country’s most dramatic boom-and-bust cycles. The city continues to feel the pain. At the end of 2011, Las Vegas ranked second in the country for gross vacancy rates, at 16 percent, and currently has an unemployment rate of 11.8 percent.
In the past 12 months, Las Vegas’ rental vacancy rates have dropped from a high of 13.2 percent in the third quarter of 2011 to a low of 11 percent in the first quarter of 2012, the most recent number available. Although Las Vegas remains one of the most vacant U.S. cities, homeowner vacancies are a bright spot, dropping from 5.5 percent over the past year to 2.3 percent in the most recent quarter.
With a rental vacancy rate of 15.1 percent, Virginia's capital ranks fourth among all major U.S. cities for empty rentals over the past year, with the first quarter of 2012 showing a 19 percent rental vacancy rate. However, Richmond’s homeowner vacancy rate ranks only 27th among the country’s 75 largest metro areas, and stands just 0.2 percent higher than the average for large metro areas.
Detroit was one of the hardest hit cities in the recession, and with an unemployment rate of 9.9 percent as of May, it's little wonder that its 16.9 percent rental vacancy rate is the second highest in the country. Surprisingly, though, the homeowner vacancy rate remains below the 75 largest metro area's average of 2.18 percent. According to the Census Bureau, at the end of 2011, Detroit had a gross vacancy rate of 12.2 percent, a level the city has virtually maintained since 2006.
Memphis's proportion of vacant homes, both owned and rentals, puts it third overall, thanks to an average rental vacancy rate of 15 percent that is the fifth highest in the nation and the 3.1 percent homeowner vacancy rate that ranks 13th.
The good news is that Dayton's homeowner vacancy rate has been trending downward since its peak in the third quarter of 2011, when it stood at 6.5 percent.
However, even this improving number gives Dayton the distinction of having the highest average homeowner vacancy rate in the country, according to the Census Data. And Dayton’s average rental vacancy rate, at 11.3 percent, is higher than the 75 city average of 9.2 percent. The Census Bureau calculations put Dayton’s gross vacancy rate at 16.9 percent, more than 6 percent above the large city average, and the highest in the country.
The emptiest city in the United States is Orlando, Fla. The 12-month average for rental vacancies stands at a staggering 18.8 percent, while in the first quarter of 2012 this number was 22 percent, highest in the nation. Florida's third largest city also has an above-average homeowner vacancy rate, but this metric has been rising during the past two quarters, according to Census Bureau data.
Despite its housing woes, Orlando has been able to avoid the financial woes of other cities, such as Harrisburg, Pa., and San Bernardino and Stockton, Calif. According to Orlando’s most recent annual report, the city has more than $125 million of cash in its general fund and over $1.1 billion in total assets (including nearly an additional $300 million in cash and cash equivalents in other funds), compared with just under $600 million in total listed liabilities.