Working with REO Properties

Monica Main

Can You Still Get Foreclosures?

• Foreclosure Inventory is LOW

• Concentrate on Hooking Up with a Real Estate Agent Who SPECIALIZES in Multifamily and Apartment Building Foreclosures

• Most Foreclosures WILL Be “Pocket Listings”

• Some Foreclosures Will Be FORMER Bank-Owned Assets Now Owned By a Private Seller Or An Asset Portfolio Management Company

• You Can Get 0% Occupied Properties But It Is NOT Recommended Unless You Want to Do EXTENSIVE Rehab• I’ll Talk More About the “Secret” Behind This Shortly!

• We Are NOT Focusing on SFRs So…DON’T ASK!

Short Sales or REOs?

•Choose Foreclosures ONLY

•Short Sales are HARD to Make Work!

•You Get a Better Discount on REOs

Introducing…

A “Second-Hand” REO Is…

• One That WAS Bank-Owned But Is Now Owned By a Private Seller, Individual, LLC, or Wholesaler

• Was Purchased By Someone Who Had NO IDEA How to Rehab or Put the Property Back Into Service• Could Also Have Been Purchased By a Professional

Wholesaler Who Sells Former REO Assets They Bought in “Lots”

• Found That Buying an REO (Requiring A LOT of Rehab) Suddenly Became Much More Overwhelming Than Anticipated

• Bought the Property from a Bank with Cash and Let It Sit Without Doing ANYTHING (or Much) With It

• Wants to Sell and Will (in Most Cases) Be Willing to Take a Loss on It!

Working With the “Second Hand” Reo is…

The NEW “Hot” Trendin Buying REOs!

This Could Possibly Work But ONLY If You Follow a Specific Strategy…Which I’ll Cover Shortly!

Contact the Listing Agent

• Find Out About MORE Listings NOT in the MLS• AKA “Pocket Listings”

• They’ll Also Call This a “Wholesale List”

• See If They Work With an Asset Management Department At a Bank

• If They Are An Asset Management Company Who Bought These Assets, Typically You Can Get These For NO MONEY DOWN

• You Will, However, Have to REHAB the Property

Otherwise Known As… “Pocket Listings”

REO Funding Possibilities…

INCLUDES“Second-Hand”

This Includes Extended Transactional (“Wet”) Funders and Bridge Lenders That Specialize in

Acquisitions & Rehab

This is Very Easy to Do!

Create a 30-Day Posting on the Loopnet.comBIG BOARD for $149!

Quick Rules for Finding Investor Partners on the Loopnet Big Board…

• Put Your Ad Under the “Looking For Capital/Investors” Heading

• Look Professional; Ad in All Lower Case with Misspellings WILL NOT Attract Investor Partnership Interest

• Be Ready With a Business Plan in a PDF File for When They Respond to Your Loopnet Ad• You Can Provide a Link in Your Auto-Response Email to a Website

Where They Can Download the PDF File OR You Can Have the PDF of the Business Plan ATTACHED to Your Auto-Response Email

• Make Sure Your Direct Contact Information is IN Your Business Plan (on the FIRST PAGE and on the LAST PAGE)

Find Deals for Other Investors, Get Up to 3% of the Total Purchase Price, and Use This Cash for Your

OWN Investments!

Since These Deals Will Be Reasonably Cheap to Pull Off…

CASHUnsecured Biz Credit

This Means That the Bank Who Holds Title to the Property Can Give You Direct Funding by Opening Up a

New Mortgage on the Property!

You Hold All the Cards; They Hold NONE!!

The Hottest Strategy…• Getting VERY SMALL Multifamily (Residential) Properties

(Between 2 and 4 Units, Generally)

• Paying 100% Cash

• Using Business Credit to Fund Your Rehab (Mostly on Biz Credit Cards)

• Rehab, Lease Up, and RESELL to an Investor

• Use the CASH from the Sale as a Down Payment for a PERFORMING Property

Financial Break Down• Purchase for $4,900

• Rehab Each Unit at $10,000 EACH or $40,000 Total

• Lease-Up Each Newly Refurbished Unit

• Resale Value After Rehab and Lease-Up: $115,000

• Probable Resale Value: $89,000 to $99,000

• Potential Profit: $34,000 to $44,000

• Total Amount of Time to Acquire, Rehab, and Lease-Up: 45 to 60 Days

• Worst Case: Property Won’t Sell (Right Away or At All) and is Worth a Bottom-Line Monthly Cash Flow of $1,500 to $1,800 Per Month AFTER Expenses

• This Amount Can Be Used to Pay Down/Off Business Credit Card Debt Used to Acquire and Rehab the Building

If You Cannot Sell the Property Right Away…

• You Can Take Out an Equity Loan to Pay Off the High Interest-Rate Business Credit Cards

• Loan Will Be Based on NEW VALUE of the Property (After Rehab)

• Typically You’ll Get an Equity Loan Based on 80% to 85% of the Appraised Value of the Property Which is MORE Than What You Bought/Rehabbed It For

The “Overall” Plan

• Buy/Rehab/Lease-Up and Sell Your First Property

• Buy/Rehab/Lease-Up and KEEP Your Second Property

• Every Other Property, Sell

• Every Other Property, Keep

• The Ideal Situation is to Have Your Every-Other Buy-and-Hold Property COMPLETELY PAID OFF with No Mortgage

• By Your 10th Property, You’ll Be Financially Free with NO MORTGAGES by Having a Pile of Small Properties

• Expense Ratio on These Properties is Typically 25% or Less!!

Get a Pocket Listing LISTFrom a Wholesaler

Then…

You Can Easily Get Anywhere from 25% to 50% Off Their Asking Price!!