Real Estate Blitz
Investors have created a new real estate bubble of their own. Throughout the US investors are buying bulk REO (real estate Owned by the bank) in huge quantities. Large real estate investment and capital companies, medium companies and even smaller investors are buying bulk REO.
Last year individual REO purchases from assigned Realtors have been sold in great quantities. This year there’s a real estate blitz that has created it’s own real estate bubble in a unique niche: bulk REO. Investors don’t want to buy property by property: more work, have to search for them, they are usually left overs from bulk purchases that no one wanted, and you don’t get the lowest price. So why do investors buy bulk distressed REO?
- For a minimum of $2.5M you get the properties available in one bundle as much as 25-30 properties depending on your price range.
- You own these properties at anywhere from .65 to .50 cents on a dollar: some lower if they are greatly distressed.
- You choose the location: local or where you have partners
- Investors are partnering across the country to take one bundle: shared by location
- You choose commercial multi-family or residential.
- Most are vacant and if not easy eviction as you own the property
- You can save on rehab money because you have contractors going from one house to the other and buying certain things: paint for example, in bulk
- Because of the low price, resale is easy, or what most investors are doing: turn it into a rental.
- You usually get first pick: it is not on the market, not advertised, little competition, better price. Once you’ve done your rehab: you are first on the market.
- Once you’ve made your return (usually up to 30% even in this market), y0u can buy more– do it again.
- Bulk multi-family: units up to 300 can be huge profits and easy rehab: all the apartments look the same: use the same appliances, etc. You save up to 30% on a normal development project.
- High profits, low costs: any questions?
What’s the downside?
- We sell bulk REO: the demand is higher than the supply! Really! We cannot keep up, the banks cannot keep up with the demand. Investors are having trouble finding more product. Foreclosures are not turning into REOs at a fast rate.
- Banks really cannot assess rehab. You ask for lite rehab: well what does a bank know. Often they only know what the appraisal says: which cannot see the structure of a house is in trouble. - Good reason to stick with commercial apartments over 4 units. But hidden problems are your problems.
- Smaller investors have to pool to come up with the $2.5M or they will have very undesirable REOs left over
- You get time to do due diligence on the property but often not an inspection. Sometimes yes, sometimes no.
- You have to prepare to takes some losses: some will sell, some you may have difficulty selling. Most will rent.
- You need a certain level of experience and you have to have a team ready: rehab team, Realtors, marketing, legal and administrative staffs. It would not be a good idea for beginners unless you have a more experienced partner on the team.
What can Realtors expect from this blitz? Once owned by the investors-- they flip and re-market: either for sale or lease. This will boost the industry.