Buy foreclosure, renovate & close with equity ?

[Jason A.]

Hi all,

I am new to the real estate game and would appreciate anyone’s thoughts here. I’d like to secure a few investment properties over coming several months in various cities across the US. Over the past 4 months I’ve done extensive due diligence and one of the more interesting pitches I’ve been given is as follows:

A RE investment firm in the mid-west helps investors buy homes in foreclosure (property goes from bank’s name to mine). The RE firm then renovates on my behalf for a fixed fee, markets the property, secures a tenant and, if I choose, will manage the property on an on-going basis. The value add here is that the gentlemen I’m speaking with says this process will allow me to “close with equity” through the renovation + buying below market via a foreclosure sale.

This process however requires all cash. I originally planned on buying properties via conventional financing, but he’s explained that forecloses are cash deals. What I can do post-closing is work with his lender to “cash out” which, in the end, would provide similar economics to conventional financing.

Any thoughts on this process? Appreciate foreclosures in the US are also now at lower levels not seen since 2006 … so not sure how he can necessarily secure a property “below market”.

Thanks !