Best REO Cities: Where Should You Buy?
June 29, 2009
For many people around NoBullRE.com, they have an interesting dilema:
They have cash, good credit, are excited about this market, but don’t know where to buy an REO property.
Frequently, their emails are bombed several times a week from groups in Atlanta, Detroit, Pheonix, Kansas City, etc, etc, etc with great properties and they just get totally confused. A common question that we get is how do I choose one deal, relative to another. Our advice….. first choose the location where you want the deal.
Without stealing our thunder for tomorrow night’s webinar (sign up here), I will at least share with you how we approached this same question. You see, we had the choice to locate our REO activities anywhere in the country and have decided on one specific location…. and this includes picking a location to add properties to our own portfolio. So why did we pick Tampa over all the other interesting places?
In theory, this question would be easy to answer….. simply ask the question “in which location will a home that you purchase produce the most net profit (combination of cashflow and resell profit)”. If we just pull out our magic genie, should be no problem to answer….. yeah, right.
Given that NO ONE can predict the future, then the next best thing we can do is ask:
What major city has REO properties that are most likely to produce high returns?
To help ourselves determine that city, here is the questions we asked ourselves:
- What cities can we get sub $100K properties that ARE NOT IN WAR ZONES; AND
- What cities can we get good rental income relative to price; AND
- What cities have banks that are NOT PANICKING; AND
- What cities are showing signs of stabalizing; AND
- What cities have professional real estate investors that are bullish (rather than scared).
We have highlighted AND in red because we see a common mistake where people get confused….. they maybe focus on where the get the BEST cashflow or where they get the BEST price. While that may make sense short term, we don’t believe that is how you maximize your returns in this market. In our opinion, you need to find the location and the property where you give yourself the best shot at all the criterion above.
In our webinar tomorrow night, we will be diving into this question and how we answered for ourselves. You may, or may not agree with our conclussions but we believe you will find the approach very informative.
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Investor Alert: Bank Owned REOs Without Pictures?
April 2, 2009
Many people believe that now is a great time to buy a bank owned properties (see yesterday’s poll). In some locations, you can literally buy for pennies on the dollar.
In addition, in some select areas, properties can be rented to generate 18-25% cash-on-cash returns while still picking up substantial equity.
That is the good news but what do you need to worry about??
The “No Bull” version is that these properties are being offered by everyone, with many of them junk. Heck, it wouldn’t surprise me if Joe The Plumber was trying to get in on the action.
Over the last few months, we have sat in on about 1.2 million webinars (or at least if feels that way) of different groups “pitching” their homes. There is a lot of things to consider to separate junk from good, but let me give you one insider’s tip:
If the offered property is supposedly rehabbed but the provider has been “too busy” to take pictures inside & out, it should raise a flag.
We have been actively looking for the best cash flow homes for ourselves and our clients and it is amazing how many providers don’t have inside pictures. At least for me, I have a hard time believing in a property if I can’t at least see what the inside of the property looks like.
BE REALISTIC In Your Expectations
Please realize that this is a FAST MOVING industry. So, it is not unreasonable for providers to have to sequence the process. From the best providers, here is the process that we have seen:
- You get exposed to the property immediately after their purchase (raw form):
- You decide you like that location and then go to contract (with only exterior picture);
- Their team hits the ground, gets pictures, finalizes their game plan to rehab, and gets info to you;
- You then close AFTER seeing interior pictures
Now realize that these pictures can still be a little rough….. rehab is typically scheduled shortly after you close. It is paid for by the property provider. So when you look at the pictures, DON’T EXPECT pristine condition…. it won’t be. However, you will be able to get a good idea of layout and current condition before they rehab it for you.
Are You Really Ready For What You Will See?
Having been in this business for quite some time now and having seen my share of preforeclosures, VA Repos, and bank REOs, I am over the “shock factor” when I first got in this business.
When someone goes into foreclosure and gets hounded by creditors and debt collection agencies, many go from being an upstanding citizen to being a wild cave dweller. Believe me that most will not “tidy up” the property on exit. Rather, they are much more likely to do cosmetic damage, steal light fixtures, trash carpet, bang holes in walls, etc. 
For the unprepared, this can be quiet shocking. I know when I walked into my first VA Repo, I recoiled in horror.
Now let me tell you what the pro’s know that most people don’t. Most of that stuff is cheap and fast to fix. We have picked up homes that would disgust most people and with a couple thousands dollars and a “mow and go” clean up on the outside, place looked great. However, if you don’t know what you are doing, you can get in way over your head doing it yourself.
As long as the rehab/cleanup is being handled by the property provider, and they and their crew are experienced, then your job is to look past the cosmetic things and really quickly assess what this property will be like with a little TLC.
Foreclosure Auctions? Are You Really Getting A Good Deal?
March 24, 2009
Have you heard about all the foreclosure auctions that are ongoing these days?
These are auctions that are conducted in the final stages of a foreclosure, with the bank hoping to liquidate the property and recover its losses. Generally this is referred to as “selling on the court house steps”. Like any auction, you get a lot of people together, some sophisticated some not, get everybody excited with a good auctioneer, and let the bidding begin.
As these first began in a few areas of the country, you could get some AWESOME deals. Of course as the news spread and the crowds crew, the banks saw a great opportunity to really get top dollar for their foreclosures.
What this means to you, the real estate investor, is that you really have to know your value BEFORE you go to the auction. It is to be determined if the auctions will remain a viable strategy for foreclosure investors.
Here is an example article of what is going on
Why Buy REO Properties?
March 18, 2009
The term REO means “real estate owned” by the lender and indicates the house or income producing property has been repossessed by the lender and already completed the legal foreclosure process. In most cases, the lender is the bank, which is why you hear the term “bank owned properties” or “Bank REO’s”.
The bank becomes the owner of the property after the foreclosure process or an individual if an agreement has reached during the proceedings..
Short Sales may be a great buying opportunity. The major complaint from people is the time involved to get it approved by the lender for the short sale price. The home is normally listed by a real estate agent for a value that they feel is right to bring buyers, and will be adjusted accordingly once the lender has finished a complete home valuation analysis to determine the actual sales price.
The majority of the time the lender approves a sales price below the current market value just to sell it quick. One needs to remember that prices in the first-time buyer range have lots of competition which could make it bidding war.
When a buyer buys a foreclosed property, they agree to take the property on its present condition and accepts all other conditions and agreements that goes with the property.
Since what is owed to the bank it is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.
Understanding The 3 Stages Of Foreclosure
March 2, 2009
If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
However, what many people also learn is that finding, buying, servicing, and reselling foreclosures is a lot of work.
If you are like many people, you recognize that there is tremendous opportunity available in this real estate market. Let’s face it, we have not seen bargains like this since the 1970’s.
Considering the home pictured to the left, you can try to acquire this home at 3 different stages:
- Preforeclosure - The bank has not yet foreclosed on the current owner;
- Foreclosure Sale - Typically auction style at the court house steps; and
- Bank REO - After the bank acquires the property.
PREFORCLOSURE:
In this stage, you are typically negotiating with the current owner to reach some sort of advantage
ous agreement. Unfortunately, many owners at this stage are very unrealistic in their expectations and as a consequence, many times you cannot get a good deal.
Also during this stage, you will have to have a stratedgy to deal with the underlying mortgage holder…. the bank. While there are many possibilities of how to accomplish this task, rest assured that unless you are trying to acquire $5M of property, you will not be high on the priority list of banks.
In short, this can be a very time consuming process where you need to look at many deals to get one.
FORECLOSURE SALE
The next option is to buy the property at the court house steps during a bidding process. In this case, you are bidding against many other professionals in the hopes that you can get a great deal. Of course, you have lots of issues like:
- You don’t know the minimum that the bank will take in advance;
- You cannot inspect the property (inside) before the sale;
- You will typically need to cash buy the property with 24-72 hours after the sale.
While some people make a living doing this, it can also be a very time consuming process.
BANK REO
This is our favorite stage to purchase….. after the bank has been forced to take the property back. In this case, there is two methods to buy:
Method 1: Bank REO’s go out to brokers at somewhat reduced rates. Generally, this is not your most advantegeous time to buy because the bank is still trying to maximize returned capital.
Method 2: Banks bundle 100’s if not 1000’s of homes together and sell them to private equity groups at pennies on the dollar because of the large volume that they buy. What BankREOSpecialists.com does is then bring those properties to you at incredible prices.
Bank REOs: What Is Realistic Discounts?
February 22, 2009
Right now, people are really starting to recognize that there are tremendous discounts available to them by buying distressed properties (foreclosure or bank REO).
Talking with investors from around the country, however, we find that there is a ton of misinformation that is out on the web, especially as it relates to discounts.
Let’s step back for a second to see what kind of discounts you can expect. Of course, this greatly depends on the property and the area.
Discount Rel
ative To What?
We hear many brokers stating “this property is 50% off the peak price”. Our response is who cares? The only thing that counts is the discount to market value TODAY. When you hear us quote discounts, then we will be referring to the discount relative to the true market value in this environment.
New Properties
One type of property that we like is new bank owned foreclosures. In this case, then a builder or developer was over extended and the bank had to take the property back. As a general rule of thumb, these properties are EXTREMELY marketable if priced correctly. Regardless of market conditions, local home buyers will come out in force to buy properties that are a legitimate 80% of market value today. Now realize that today’s prices are very, very low. By buying at this kind of discount, then as soon as you get some sort of market rebound (yes, it will rebound at some point), then you can truly be in a great equity situation.
Older Existing Properties
This is where the real discounts are to be had…. the market is not as large as for newer homes to banks really do have no outlet for these properties. In this case, single buyers can expect to purchase these homes at 60-70% (30-40% discount) of today’s prices if they do a fair amount of searching.
However, by purchasing in conjunction with a much larger buying group (like BankREOSpecialists.com), you can easily get properties at 40-50% of current market price (our typical properties of this type are priced at 45% of current market value or less)!
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Who Is "REALLY" Making $ In Today's Real Estate Market?
Our 29,689 Members Tend To Agree...
It's Usually Not The GURUs
Have you ever noticed that every "Guru" real estate pitch sounds the same........
They once were poor, but now are rich working only 5 hours per week, and you can be rich too if you just buy their "can't fail system".
Or have you noticed that every property promote has a can't miss proposition, if you just buy TONIGHT.
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