I was wondering on how the conditions of these properties are when bought? What is the dollar amount difference when purchasing a bank REO property compared to a regular property? Does anyone have a Bank REO property that has a steady cashflow?
My experience with Bank owned properties is that they are marketed much like a retail property. Unless it's been sitting around for a long time, I haven't been able to find many at discounted prices and they are almost always sold as is, where is, with no warranty. If you find one you think is listed way below market, make sure you get an inspection before buying it.
In Houston I focused on REO's for a few months and bought two only because the listing agent was an idiot and didn't really know her own market. She listed them well below, but when I made low ball offers on others I was told by the agents that the banks will not consider anything less than 90% of their asking price. There were a few that had actually been listed for more than a year, and one that had been listed for 22 months and they still wouldn't budge on price.
Thank you for the response Christy. Would you know what a normal inspection goes for? How come they would not budge on the price? If it has been on the market for that long, you figure they would. Typically, how much of a low ball offer can you make with an REO property? What is the percentage? Thank you for your response.
Unless there has been something recently has happen to the property with most lenders a 90% offer will be rejected. With some lenders they have an algorithim that they use in pricinng the property. I am not sure of all the variables that they use but one of them is the number of offers that that have recently received on the property. They do count stupid offers as offers, ie a 10,000 on a 100,000 listed price is still counted. There was a REO locally that just sold for about 10% of listed price. The property had a fire while vacant and with that new information the lender sold it for less.
Reo properties will never have a steady cashflow because the property will be vacant. It is up to you to do any repairs and either sell the property, live in it, or rent it out.
As for the condition of the properties I like to tell people that it's just like christmas. You never know what it is until you see it. Sometimes they will be move in ready, other times you need a Hazmat suit to clean out all the crap(literally) in the house.
Ohio, do you have to get lucky with REO properties? Do you basically have to find one that is a diamond in the rough? (if there are any out there). Are they worth investing in? Would you be better off fixing the property and flipping it? or fixing it and holding it for the long term? Thank you for the response.
With REO properties its not luck its looking at a lot of properties to find the one that will suit your needs. As for buy and hold, or buy and sell it depends upon your stratagy for your investments. I am a buy and hold kind of guy. Let my tenents buy the property for me. If you buy and sell you are looking for a property that you can rehab and make a profit on. Properties that are rough can be a very good value to repair and sell for a quick return it all depends on your goals.
If you are going to invest in buy and repair properties remember to include in your cost of repair in your holding time costs--interest, insurance, utilities. Also remember in your analisys to include the cost to sell the property.
That is a good point Ohio. I do agree with you on the buy and hold. Do you own any REO properties?
I own a four family that was a REO someone rehabed it as I can do normal repairs but I know when something is over my head. If you are going to buy and hold you have to ask yourself a hard question. If someone is behind on the rent can you do a setout on December 20? If you can't find it in your heart to do an eviction at that time of the year don't rent out your properties just fix them and sell them.