By Les Christie@CNNMoneyJanuary 2, 2014: 7:15 AM ET
NEW YORK (CNNMoney)
It's getting harder to make a bundle buying up foreclosures and renting them out.
The auction prices of homes climbed faster than rents in 2013, so returns on investment dropped, according to a report from CoreLogic.
That's a change from the past several years. In many cities where mortgage defaults spiked after the housing crash, investors were able to buy foreclosed homes at prices so low they were able to make big rental profits.
The practice is still profitable, but in many places not as much as it was.
"It's gotten so competitive that discounts at foreclosure are not where they were," said Daren Blomquist, spokesman for RealtyTrac. "It's harder for third party purchasers at auction to make a profit."
And rents have lagged. Census Bureau numbers show that rents only grew an average of 2.2% during the first nine months of 2013, compared to the same period in 2012.
As profits on foreclosures drop, investors will cut back on purchases.
Glenn Plantone, a real estate investor in Las Vegas, said that there were only 208 properties sold there at auction to third party purchasers -- not lenders -- in October. That was the first time in six years that a month had fewer than 300 of such sales.