BiggerPockets

I've gotten to a position in my business where I would like to expand into different niches. For the experienced investors, which would you prefer and why would you choose one over the other if not both.

Agreed with Anson. REOs are much quicker and simpler, and you don't have to deal with tenants (usually) at the sale. Short sales have the advantage of less competition (in my experience), but a more difficult and tedious process.

Short Sales can bring great bargains and great frustration. I prefer REOs but I will not always pass up a good deal on a short sale, in fact I just closed a short sale purchase last Friday.

Thanks everyone for your replies and comments. Another question I have is about the process. I hear you have to put down $1,000 EMD or even up to as much as $1,500, is this true? Also I've heard that the bank makes you hold on to the property for a certain period before it can be sold, i.e 30 to 120 days, is this true as well? Thanks again for your input, it is greatly appreciated.

Thanks Andy. In your experience, is it easier to flip REO's via assignment or double close? Do the banks allow this type of transactions?

Tim, are you referring to purchasing it as a LLC and then selling the LLC to an end buyer? If so can you briefly walk me through how that transaction would work, or anyone that has done this before. Thanks everyone for all of your help.

I will be dealing with all cash buyers in this process. I'm planning to wholesale them.

Jeffery, if you're talking about what the bank requires, it can be higher than that sometimes. When I bought my property from Fannie Mae they required 10% of the purchase price as EMD, so I had to put down about $4000 EMD.

I think it is just a general Fannie rule--10% EMD for cash investors. Maybe someone else here knows if they are still doing that? They demanded the same thing on an offer I made on a different house, but I didn't like their counteroffer so I backed out. A high EMD requirement doesn't necessarily means it's a great deal--you still have to look at the numbers.

There was a lot of competition for it. I paid 41K for it, put about 9K in repairs into it, and it currently rents for $700/month. It does not quite meet BP's 50% rule but it shows great, decent neighborhood, and it's very easy to rent out. I plan to hold onto it for as long as possible.

To add some info and to clear up some misconceptions from this thread:

- You can *NOT* assign an REO, per the addendum you will sign along with the purchase contract;

- A few banks (most notably FNMA and BoA) have deed restrictions that say you can't resell under certain circumstances after you buy. Specifically, FNMA generally won't allow you to resell for more than 20% above your purchase price for 90 days (though you can resell for under 20% above the purchase price) and BoA generally won't let you resell within 60 days under any circumstances;

- FHA doesn't disallow resales within 90 days anymore, though you may have to get two appraisals and provide some documentation that proves you actually added value to the property if you wish to resell a property quickly to an FHA buyer;

- Putting 10% earnest money down on an REO is pretty standard, and some banks will require it (specifically FNMA). So, if you buy a $50K FNMA property, expect to put to put down $5K. Likewise, if you buy a $250K property, expect to put down $25K.

- Yes, you can definitely purchase a property with an LLC and sell your interest in your LLC to the end-buyer.