Area investors have dozens of possibilities vying for their business at all times. Bergen County real estate investment opportunities come in a variety of forms: raw land, single-family residences, and multifamily rental housing in many forms, from duplexes to apartment buildings. Investors compare the various offerings according to the likelihood of return on their investment vs. downside risk.
Foreclosure represents the ultimate risk — so no matter how unlikely it might be, canny investors study the histories of real estate investments that have stumbled. Whether Bergen County foreclosure statistics or national trends provide the data, projecting the likelihood of such ‘Close Encounters of the Foreclosure Kind’ is part of an investor’s due diligence.
That’s why my eye was drawn to several published reports about Fannie Mae’s recent nationwide study. It drew an interesting connection between an investment properties’ relative location and the rate of potential default (foreclosure). National data is weighted toward big city populations, yet I think it’s a relevant approach to weighing the likelihood of a local foreclosure. Location is a given, and here, it’s relative location that’s important:
- Locating close to workplaces matters. Each additional minute of commute time raises the risk of default by 3.7%. Put another way, each additional five minutes of commute time makes the likelihood of foreclosure 18% greater!
- Public transportation is significant. If 30% or more of a neighborhood’s residents commute by rail, the risk of a local default is reduced by a full 58.4%.
- Mixed-use areas are a positive. When there are 16 or more retail establishments nearby, the risk of default is reduced by more than a third.
- (This is one we could have guessed) — affordability is key. If a multifamily building fits Fannie Mae’s definition of ‘affordable housing,’ foreclosure risk is reduced by 61.9%.
- Parks matter. If the property is located within one mile of protected green space, the risk of foreclosure is reduced by 32.5%.
Naturally, avoiding any possible future local foreclosure is Job One for all my real estate investor clients. For up-to-the-moment information on the state of today’s market, join them: contact me anytime!