REO, Wholesaler, or Direct Marketing?

Question

Hi Everyone,

Recently I've been asked by the Fort Worth Hope Center to assist with their Real Estate program. I am trying to determine the best course of action with the resources at hand.

While we are attracting some private investors that will be of help in the future, right now we have access to quite a bit of Hard Money. We are looking for SFR's to rehab.

If you had Hard money already lined up and qualified, would you spend the time and effort marketing for properties, or make bids on REO property? Which strategy do you believe to have a better return?

Jon Holdman · Answer

If you have cash lined up and ready to go, what about trustee sales?  Perhaps in combination with REOs.  If you take the time to develop the relationships Will talks about, I would think REOs would be a more consistent and dependable source than direct marketing.

Bill Gulley · Answer

We would get properties from several local banks and BoA and reginals. It's public relations 101!

The bank provide a great deal, readup on the Community Reinvestment Act, banks are to make low interest loans and provide other benefits as required by law! It's based on the size of the bank. Beyond that....

You get a good deal on a house, go in and rehab it. Select a family and then...

Call the TV stations, newspaper and get the reporters out there for your ribbon cutting ceremony. Heck, make the mayor show up or at least the city councilman/lady for that district.

All this was made possible by XYZ Bank with great support from Councilman Jones. Pat backs and give credits. Have a sign in the yard...this HOPE HOUSE made possible by XYZ BANK.

That's PR a bank can't buy (but they can, LOL)

Partner with the banks, we will take all of your properties within this range at 50%...whatever. It's a win-win-win! Good luck

Steve Babiak · Answer

Edward,

Is this organization looking to be part of NSP (Neighborhood Stabilization Program)?

http://www.lmgtfy.com/?q=NSP+Neighborhood+Stabilization+Program

This gets into the HUD arena, and there is something called "NSP First Look":

http://www.hud.gov/offices/hsg/sfh/reo/mm/mmIIIfirstlooksales.pdf

Some combination of buying at foreclosure auction (sheriff sale or trustee sale), along with buying REO and HUD properties, should get you a good number of target properties.

IMO, you are on the right track when you say that getting a deal and following all the way through is  a good opener for forging a relationship with the REO listing agents.

Bill Gulley · Answer

Ed, are these or could these being purchased by the N/P?

If so, use another strategy. You partner with the bank for the REOs. Secondary market, HUD, etc. all have programs for rehabs for non-profits.

You have huge advantages in a N/P, use it!

As far as conventionally doing investor deals, there is no one strategy in my opinion, take your cash or investors to the best deal on the market at the time,it could be a foreclosure, REO, tax sale, estate, fsbo, what ever! Search the MLS first, look at estate sale/auctions, look at the entire market in the price range and type property you are looking for and narrow it down. If it turns out that it looks to e a short sale, so be it, do a short sale!

Trying to find deal by category of a strategy will only steer you down the path of that strategy and a really great deal could be across the street!

When you get it, then go to what you want to do with it as your exits strategy, wholesale or flip it, rehab and hold/lease, etc.

good luck

Rob Gillespie · Answer

Reo properties are good, but it is competitive. You can only do so many at one time, so how aggressive do you wanna get with your marketing? When I go into buyin mode, I hit all sorts of avenues, but by far the easiest with the low hangin fruit is the REO rout. :mrgreen:

Will Barnard · Answer

The answers to your question will have a great deal of variances as each individual investor will have different results depending on their network/contacts and abilities.

For me, REO properties are the way to go, but that is in large part, due to my contacts and my ability to get REO properties before they hit the MLS. This allows me to avoid competition and increase profits. Not everybody has the same contacts and as such, results will vary.

I also contracted a private sale from an absentee owner in which I was able to structure the purchase via subject to the existing mortgage. This was one of my best deals yet as far as profit margin is concerned, but it is also more of a lucky grand slam than regularity.

Jerry Puckett · Answer

Actually, yes Bill, these will be purchased by the Hope Center. I was aware that HUD had a program for Non Profits (and we are currently applying and trying to qualify), but I had no idea that the banks may also have some sort of program. Could you expand a little, or point me down the right path towards good information? How do I partner with the banks?

I'm not one to limit myself to any one strategy. But when it comes to budgeting my time and other resources I'm looking for the best possible return. Bidding on REO property has been out of my reach until now, and I want to explore that fully as well.

Jerry Puckett · Answer

The margins in Dallas and Tarrant County are very thin indeed. I did some research for an out of town investor last year who was looking to come here, and found that those sharks Will mentions have managed to bond together to keep the new guys out.

Over the last year or so I've read every post that Will has written on acquiring and maintaining the relationships necessary to follow through with REO's. I believe it is well worth the effort. And I agree with Jon that the source would be more consistent and dependable.

Please correct me if I'm wrong, but unless or until those relationships are forged, can you not consistently buy right by doing your homework and making the bids until you get one (or more) accepted? Is that not what many of the rehabbers here do, keep making offers ? Once you get a deal and follow all the way through, is that not a good opener for forging a relationship?

Will Barnard · Answer

To add, trustee sales are a good resource, just beware: Trustee sales, particularly in large counties where competition is firece (such as Los Angeles and other so cal counties), a beginner could get eaten whole by the sharks that swim in those waters. Also, note that spreads have become very thin as of late at trustee sales making deals even harder to get.

Jake Kucheck · Answer

Agreed- the least amount of competition will almost always be at TS, unless you are Will.  Even then, if you are doing your homework on the TS acquisitions, you might be able to give Will a run for his money on discounts to market value.

Last three TS acquisitions: 46%, 53% and 54% of ARV, respectively.  Happy to provide addresses for verification purposes if anyone is so inclined or if Josh has figured out that part of the system.

REO, Wholesaler, or Direct Marketing?

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