This is a continuation of my previous article What is Working Successfully in the 2010 Real Estate Market? (Part 1). Many people are struggling right now, so I put together this article to try and steer people back in the right direction. In the previous article we highlighted short sales and foreclosure deals.
Bank owned REO properties are even a bigger money maker than short sales. During June 2010 over 40% of all Orlando closings were on bank owned R.E.O. properties. These bank repos get sold to someone either through a Realtor®, through an auction, or through a bulk sale. From my observation these properties actually get approved much faster and sell for a much lower price than the short sales. Before I started listing R.E.O.'s for banks, I thought that nearly all bank owned properties were nasty and disgusting. But that is definitely not the case. Some are in nearly pristine condition. However the nicer ones typically sell to owners and not investors.
Most of the wholesalers and rehabbers out there are focusing on the R.E.O.'s. So much so that it seems the good ones that are not overpriced are selling in bidding wars either at the courthouse steps or through the M.L.S. (The Realtor's® Multiple Listing Service). I am seeing a lot of rehabbers back in the game again. Buying properties cheap, fixing them up beautifully, and then re-selling them for a very nice profit. Because of the current financing situation you might not be able to rehab and retail them in the low end neighborhoods right now. (Lenders are actually requiring down payments, verifiable finances, and decent credit.) But I am seeing plenty of investors doing this over and over and over again in the nicer working class / middle class neighborhoods around town.
I am also seeing a fair amount of activity in the condo market. Prices are super cheap in many condominium complexes. You can buy a 2 bed / 2 bath, 1100 square foot condo, in a decent location, that needs little more than a paint job for anywhere from $20,000 on up to $50,000. Few lenders are making loans in these complexes so sellers are typically selling for dirt cheap to buyers paying all cash. At those prices, these properties will bring a positive cash flow all day long (assuming the monthly dues are reasonable). Investors and vacation buyers are snapping up Central Florida condos left and right. You do need to do a little due diligence to make sure some giant assessment is not on the horizon. The new Florida condo law SB 1196 that went into effect on July 1, 2010 should help smooth out the financial problems in many of the local condo complexes.
Miscellaneous Foreclosure work. This includes all the different ancillary services derived from short sales and bank R.E.O.'s. It includes short sale negotiation companies, foreclosure attorneys, vendors doing trash outs and clean up on foreclosed deals, B.P.O. work (Broker Price Opinions) for appraisers and Realtors®, and the list goes on and on. Be creative. There will be thousands more short sales and foreclosures working their way through the system for several years to come.
Truly the vast majority of the properties making money are these foreclosure properties. As you can see from my statistics above, in June roughly 65% of all sales were either short sales or R.E.O.'s. So that is where your focus needs to be. Do not be focusing on the money you lost when the bubble burst. Instead focus on the future and making new money to replace the old. I know quite a few local people that will make 6 figure paychecks in real estate this year. Turn your focus on short sales and R.E.O's in volume and you might just be one of them.