Unsure of REO?

Question

hi there,

i'm wanting to get into more of a long game scenario w buy&holds, but keep hearing that wholesales, flips, etc. are a great way to generate some quick (or quicker) profit that can then be used to help to fund the b&h strategy.

i don't know the beginnings, however, of what to look for/watch out for in relation to that sort of strategy. this was just sent to me by zillow because it's in the area i've been looking: http://www.zillow.com/homes/for_sale/fsba,fsbo,for...

it's a super solid area with incredibly high demand. this could end up being a buy & hold, actually, since it fits a lot of the things we've been looking for and is in the area we'd prefer no less.

i guess my question is simply this: how do i best assess this in terms of it being an REO? is it worth pursuing at that point?

thanks for any insight-

William Hochstedler · Answer

If you're a buy and hold investor, understanding exactly what you can rent a given house or unit for is important.  It's more than median rents.

Start looking at classifieds.  Play tenant and go see some of the units.  Figure out your price points.  You need to know exactly what something can sell for if you are to predict your profit margin.

Property management companies are another good resource in understanding rents.

Good luck.

William Hochstedler · Answer

@John Blythe

This is a HomePath property.  Both HomePath (Fannie Mae foreclosures) and HUD (FHA foreclosures) have an initial bidding period for owner occupants before it opens to investors.

If you are looking at REO's, I would recommend interviewing some real estate agents who can represent you.  REO's always have a buyer side commission built into their prices so you don't gain anything by trying to do it by yourself.  Making offers through the listing agent can be a crap shoot at best and you miss the opportunity to develop relationships.

Generally you will have physical distress with REO's so you need to make sure you have the ability to do any necessary repairs.

There's lots of resources here on how to analyse cash flow.  Start by understanding market rents.

Good luck.

John Blythe · Answer

thanks for the info! By "market rents" do you mean anything more than simply knowing median/average rents for the area?