Originally posted by MikeOH:
Alison,
I don't necessarily agree that these properties are overpriced. You need to do a little work to determine the facts. In many instances, REOs are trashed by drug addicts; bad tenants; vagrants, etc and LOOK terrible. The worse they look and smell, the less likely anyone will buy it (even at a ridiculously low price).
I've told this story before, but I'll tell it again for you. I found a duplex being offered for less than half of the market value in the area (I believe that the initial asking price was $39K). Duplexes in that area typically go for about $80K. I went to look at the property with my agent. Every window was boarded up. We had a lot of trouble opening the door because there was so much junk on the floor inside the building. The entire duplex had be spray painted purple and black stripes. You literally could not see the floor ANYWHERE in the house because of all the clothes, beer cans, trash, dog feces, etc. It was UGLY. On the good side, it was a brick building and the structure was in good condition. I offered $11,000 for the property. The bank countered at nearly full price.
Every couple of months, I would have my agent re-submit my $11,000 offer. Time went by with nothing happening on the duplex. A full year later, I received a call from my agent. The bank called my agent and asked if I was still willing to take the property for $11,000. I was and I did. I spent $25,000 rehabbing the place and ended up with an $80,000+ duplex for $36,000 (45% of market value). It's a very nice duplex and has been rented every since!
So, in my opinion, just because something hasn't sold doesn't mean that it's not a great deal. Go take a look and then run the numbers. Better yet, post the numbers here and you'll get many opinions from experienced landlords. To evaluate the deal, we need gross rents, purchase price, and rehab cost.
Good Luck,
Mike
Mike,
I've looked at a few similar properties and was concerned that even at a very low price you would have to deal with vandalism and theft during rehab. I would think that that kind of stuff could really drive the price up. How did you address those issues?
