In some towns and cities where the number of foreclosures is especially high, local governments view the presence of so many vacant houses as a threat for potential fires, accidents, acts of vandalism or illegal squatters. So they support the kinds of legislation that will help them turn these empty buildings into affordable and attractive homes. That is part of the reason why a special provision to grant a tax credit worth $7,000 to those who buy foreclosed homes was written into the Foreclosure Prevention Act proposal. The tax compensation is meant to give an extra incentive to foreclosure investors and help offset any financial risk they may take by buying into a battered, beaten-down housing market.

Foreclosure investors can take full advantage of buying opportunities by making basic cosmetic improvements. That way they not only help their own communities and generate goodwill, but they also boost equity and resale value.

One lucrative strategy is to fix up homes but hold on to them until the housing market regains its footing and they bring higher prices.

The combination of sweat equity and market appreciation creates double profits, and while investors wait for the market to change directions they can rent the properties, sometimes to tenants who will do repairs or improvements in exchange for discounted rent.

Because there are so many people losing homes to foreclosure, the rental markets in those same foreclosure-prone neighborhoods are especially good. The supply of available rentals is shrinking due to increased demand, and that is driving monthly rental payments up.

Entering the rental market now and waiting until the resale market picks up is a clever strategy for making the most of both economic cycles. If tax incentives become law that will only add to the accrued financial benefits for foreclosure investors.

Supporters of the package of housing market rescue plans praise the bill for extending the government’s recent bailout of investment firms on Wall Street to include those hurt most by the mortgage and housing debacle - namely, housing industry professionals. And although President Bush has indicated that he will veto the bill because of his view that it imposes too many risks on American taxpayers, it is likely that some version of the bill will pass before the end of the year.

Whether or not direct incentives for foreclosure investors remain in the legislation and pass into law remains to be seen. But regardless of whether foreclosure investors get perks like tax breaks, the bill will still benefit them because it will help boost the market, which will lift prices and automatically convert recent bargain basement foreclosure purchases into quick and easy equity.

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