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Now Is the Time for Those Bottom-Feeders to Do Their Work


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You will also need a credit score of 720 or better, Uhl said.

Plan to pay a higher interest rate than on your own home loan. Interest rates for investors are now running about one percentage point higher than those for owner-occupied homes.

It will be up to experienced investors to clear out the bulging inventory of trashed and abandoned foreclosures. Those people look for the properties that scare away buyers who want a home of their own.

"The uglier the house, the better the opportunity is for the investor," said Frank Sharp, managing director of Watershed Renovation Capital in Alexandria, which specializes in short-term loans to real estate investors in the Washington metro area.

"We expect them to buy and get renovations finished in no more than three months, then get it sold or refinanced within three months," Sharp said.

"If you pay too much for a property in the beginning, it's very hard to recover from that in a market where prices are continuing to decline," he said.

"In Prince William, prices are still declining 3 percent a month," he noted.

High interest rates are another reason investors want to get in and out of these deals quickly.

According to Watershed's Web site, it charges a 12 percent annual interest rate for the first three months, 14 percent on the second three months. After nine months, the rate goes as high as 18 percent, plus fees. These are not mortgages made for dabblers.

Most of Watershed's clients are full-time, experienced investors, Sharp said. But if a newcomer wants to give it a try, he said, he will pay close attention to the contractor that investor has lined up and will expect that investor to pay a fee to a mentor for investing guidance before approving the loan.

His company's average loan amount is $200,000, Sharp said, which includes the cash needed for repairs. After renovation, the properties sell for an average of $300,000.

"These are not social workers, but they are doing good stuff," he said. "They're really adding something to the relief of this post-foreclosure debacle."

Opportunities are not limited to Prince William County. In September, prices fell 25 percent in both Loudoun and Fairfax counties compared with a year ago. Sales volume shot up 57 percent in Loudoun and 72 percent in Fairfax.

There's still way too much left on the market, with new foreclosures and short sales still coming. There were more than 15,000 active listings in those jurisdictions in September, according to MRIS. If you're thinking of investing, you have the time to give it proper study.

"If you call it a light at the end of the tunnel, you need to remember it's a pretty long tunnel," Sharp said.

E-mail Elizabeth Razzi atrazzie@washpost.com.


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