Comps and Flips and REO's

[Chris Ferren]

Good Evening All,

So I live is Sacramento, CA and there is a few different zip codes that I have been looking at investing in. This would be for a rehab and flip. The problem is this: Sacramento was especially hit hard by the housing recession. It seems like these SFR that I'm looking at are valued at 1/3 of what they used to be 5 years ago, and it seems like nearly all the homes being sold are REO's. Sacramento also has a high unemployment rate, I think around 14%.

When looking at Comps for a potential deal on a rehab, do you look at other REO's or FSBO sales? Are these two valued any differently? I've been looking and comparing the avergage/sq foot price sold, and it really seems like the REO's flood the market for these zip codes. Should I be looking at a different area? If I can still find deals in these areas, how do you run Comps in areas like this?

Thanks for the help! I've been studying the market now here for a bit, and would like to finally make a move in the next few months. I have the funds, but I want to make sure I'm well prepared when I finally take the plunge. Thanks

CFC

[Will Barnard]

What you must consider in addition to what Eric stated is the condition of the other REO and short sale properties. If you rehab and have your home in prime move in condition, while the balance of the product on the market is trashed, you have a great opp. to get a retail buyer wanting a turn-key home to move into.

That stated, you must be able to have it appraise for teh retail price and that could be a potential hurdle.

In my markets, I look for REO's that are trashed, but on the best streets in the best neighborhoods possible. I also make sure that there is not a lot of actives close by and if so, I evaluate them closely as they are my competition during my exit.