Buying foreclosed homes and converting them into vacation rentals is set to become the next $100 billion dollar industry, according to CoreLogic’s latest report. Experts think that in the wake of the real estate bust, the demand for owning homes has dropped – causing rent to rise and home prices to drop. Because of this, savvy real estate investors as well as banks and investment firms are buying up foreclosures and turning them into rentals. This is very apparent in popular vacation spots such as Destin, Florida, who has seen a rise in Foreclosure purchases for the sole purpose to covert the homes into Destin vacation rentals.
According to the popular website, BeachGuide.com there has also been a rise in the number of vacation rentals available all over Florida, indicating that this practice is becoming more and more popular amongst investors. Bank of America has started it’s very own pilot program that helps families that have lost thier homes to foreclosures get affordable rentals. This program is known as “Mortgage to Lease“. Additionally, many hedge funds and private equity funds have been spending huge sums of investment money (hundreds of millions) and snatching up foreclosures like wildfire. Fannie Mae and Freddie Mac have responded as well, selling off thousands of foreclosed homes that they have had in holdings. This has started a bidding war with Wall Street Firms getting involved, buying up foreclosures for the sole purpose of converting them into vacation rentals.
This practice has become so popular that even the Federal Reserve has taken notice, issuing new guidelines for banks earlier in the month when turning these foreclosures into rental properties.
This has become a very controversial practice, however, with many people voicing concern that the same banks that are responsible for the current state of the housing market – as well as the very same banks who are foreclosing on record numbers of homes, will now be able to profit at the expense of families of foreclosures that were lured into thier shady practices in the first place.