95% of REOs Need Rehab

Real Estate Broker/Owner

95% of REOs need rehab, analysts say...post found in RealtorMag from 04/16/12...talks about investors buying up foreclosures in bulk...

Investors are buying up foreclosures in bulk, viewing the potential returns from REOs-to-rentals as better than most other investments.

But experts caution investors to be careful that they don’t take on more than they can handle, and make sure they devote some attention — and budget — into the rehabilitation of many of the properties they buy.

Nearly 95 percent of distressed homes are in bad shape and unsuitable for renting out, Morgan Stanley analysts estimate.

"The importance of getting construction — or specifically, re-construction or rehabilitation — right cannot be overstated," according to a recent report sent to Morgan Stanley clients. "The quality and cost of rehabilitation can continue to benefit or haunt the asset far past the initial completion of work. For example, shoddy plumbing or other infrastructure work can result in significantly higher maintenance costs over time, and can also affect eventual exit pricing."

Morgan Stanley provided estimates to investors in the report, citing estimates of renovation work to cost about 25 percent of the purchase price.

Source: “Rehabilitation Vital to REO-to-Rental Success,” HousingWire (April 13, 2012)
references: realtor magazine, daily real estate news, housing wire


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  1. Ron Chastain 05/02/2012 11:36 PM
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Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

It is a fact that most of the properts will need to have some work to major amounts of work.

May 02, 2012 11:20 PM #1
Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!

People see REO and foreclosure as a pennies on the dollar deal but sometimes forget to count the pennies they will need to spend rehabbing. Great article to highlight.

May 02, 2012 11:46 PM #2
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Donald Horne

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