BiggerPockets

If you're not paying cash, you're not in the game

Tuesday, May 05

California loacted REO's require a specific breed of investors to maximize success. We all to often hear about creative financing strategies to acquire properties and while they may be true, they do not work for all types of investments in all cities across the country.

California had one of the largest rapid real estate booms ever from 2001-2006. Home prices shot up so fast, it was impossible to keep up. Any home, in any area, in any condition could have been purchased, sat on for 3 months and resold for tens of thousands of dollars in profits. Now that the bubble has not only burst, but exploded, we have experienced one of the greatest rapid declines in the country over the last two years.

REO properties are everywhere. So how does one profit in this current CA market? Prices have dropped so far and so fast, that in many areas of Southern California, homes are once again affordable to first time homebuyers as well as other buyers. We are experiencing multiple offers at and above asking prices as buyers attempt to outbid the next. Banks are aggressively underpricing their properties knowing it will create the buying frenzy and have multiple bids within the first day the property hits the MLS. This does not make for a profitable situation as an investor as we would never participate in a bidding war. Once more, we can not compete with an end user who is willing to pay full market value for a home.

Properties that have been listed for over 120 days are usually in very bad shape and or in very bad areas and do not always make for great profit potentials for us investors. I have found the best deals by getting my offers in to brokers before the property ever hits the MLS. I also meet the BPO agent there to encourage the very lowest BPO submittal price as possible. Then, assuming the bank came in at or below the suggested list price, I have the broker submit my all cash offer before the public every knows it is there.

A few days later (assuming all goes well) I have locked up an REO at a great price and look to rehab and flip it to an end user (retail it) or flip it to a rehab investor (wholesale it). All cash offers get it done and it is very difficult to get your price points when you must use debt leverage when dealing with banks.

If you want to agressively go after the REO market in CA, come equiped with cash, as your net result will be much more profitable. Good luck and happy investing.

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Comments

1. 

   Harrison Painter Reply
   almost 3 years ago

   Cash is King!

2. 

   Will Barnard Reply
   almost 3 years ago

   And leverage is the Queen, but not with REO's!

3. 

   Moe M. Reply
   almost 3 years ago

   Nice post Will. I like reading your posts -- thanks for sharing.

   Moe

4. 

   Will Barnard Reply
   almost 3 years ago

   Thanks for reading them Moe. I hope to get back to posting more regular blog posts as I got too busy in the fourms section and in my regular business activities.

5. 

   Dory Peters Reply
   almost 3 years ago

   Interesting post, and this supports other things that I've heard about investing in several CA markets (primarily LA/OC/Riverside, Oakland/SF, and Sacramento).

6. 

   Lulu Maliza Reply
   almost 3 years ago

   Hi Will

   Im in SA and new property sales, but I beleive we don't have an MLS or equivalent. I kknow that the banks send agencies lists of Properties In Possession (PIP's).I think PIP's would be the nearest thing we have to MLS and am wondering how would one then get access to these lists before they become public knowledge and how are you able to influence the price the banks list these properties for?

7. 

   Will Barnard Reply
   almost 3 years ago

   I have no pwoer to influence the bank's price points, only the BPO agent who makes their recommendation to the bank.
   Besides that, I develop great relationships with borkers who conistantly get REO listings and have my all cash offers written and ready (plus I know what the suggested price point will be to the bank - BPO) so I know if it is a property I can move forward with. When the bank comes back with the price apporval and it is at or below the BPO, my offer is immediately submitted to the bank before it ever hits the MLS. Once it does, I am dead in the water.

Post a Comment

Your Name:
Your Email:
	Subscribe to comments?