Will eminent domain drain your profits or allow you to strike gold in the next few months?
Eminent domain has been floating under the radar for quite a while. In fact many new real estate investors may not be aware of its existence at all. However, as the economy looks up and the real estate market begins to surge (hopefully) around the country it is making the news again in a big way.
For those unfamiliar with eminent domain it is the right of the government to take control of property it deems is needed for more important uses. Most often this means whatever puts more tax dollars back into local government coffers. Of course they are supposed to offer fair compensation for taking control of land like this but with real estate prices on a roller coaster ride over the past few years who knows what they deem fair market value.
Certainly those who have held their properties since before the crash and are now being forced out at bargain basement prices are not happy. Especially when it is anticipated that those values and equity would have been ballooning in the next months and years. Smart going by cities and counties though who can pick up land on the cheap.
However, after the foreclosure fiasco of the last couple of years and how much the plight of property owners still remains in the headlines and a hot political topic most local governments are right to be cautious about preying on property owners.
In fact some are complaining that some cities are paying too much for their acquisitions. Take a look at Allentown, PA where $15 million has just been paid out to grab up enough space to build a new hockey arena. Tax payers don’t seem to be too happy about footing the bill for property owners being over compensated and raking in windfall profits for their payouts. This includes one business owner who was paid almost a million dollars for a property recently purchased for just $150,000 and another who was paid $250,000 over what they paid last year plus $100,000 to relocate.
Savvy real estate investors who are looking for those really big paydays may be wise to be on the look out for projects in the works and plans on the table which could lead to big payouts for those who own property in the path of these developments and expansions. Clearly it won’t take turning $150,000 into a million too many times to start hitting the rich and famous lists.
So watch the news, network with developers and a local Chamber meetings and attend city meetings. Then use the latest technology to hone in on those who are holding REOs and distressed properties in those areas and try to take them out.