There are many real estate investors who are flipping bulk REO tapes for fast profits. However you will also find that there many savvy real estate investors who are buying bulk portfolios to hold. These real estate investors have found that by so they can make MASSIVE profits by using the same method some car dealers use. They use a “Buy Here – Pay Here” approach.
Providing owner financing to a market segment who cannot get a traditional loan is proving to be a market with massive potential profits. To understand how these investors are profiting, you must first understand the concept of a “Land Contract”.
A land contract is a contract between the buyer and a private seller of a property, where the seller will hold the title or the deed to the property until the property has been paid in full. ” Using the Land Contract, the investor will sell the property “AS IS” to the new buyer.
Many times the investor will sell if for only 10-20 percent above what they paid for it. The reason for this, is because the price appears very attractive to the the buyer because they are getting a house way under market value.
The investor in turn however will offer a slightly higher than market interest rate to the buyer, as the transaction is one that provides a NO BANK FINANCING opportunity. Since owner financing is available, there is a much wider pool of potential buyers. Remember that the payments to the new buyers are still cheaper than paying rent. This means investors can sell their properties extremely fast.
Can you imagine if you were were a “traditional” buy and hold investor trying to rent out one of your investment houses in the same neighborhood as where a bulk reo investor comes in, sells the house next door for less with payments cheaper than rent? This is one of the reasons why these investors can sell houses faster than normal.
The only drawback to this type of investing strategy to a new investor is that they have to buy at least five properties at a time to take advantage of getting these types of discounts from the banks. The investor however really should not be nervous, because anytime you can get a house at 25% – 45% of Loan To Value, there is not much risk at all. Average properties found in these small bulk portfolio pools range from 21,000 to 25,000 dollars. How does that work out for the investor.
Lets take a look at some sample deals which are only representations:
2112/2114 Delachaise, New Orleans LA: Sold in 73 days Sold for $29,354.00, 16 year mortgage @ 9.9% Monthly mortgage payments are at $300.00
107 Paisley Drive, Williamston SC, Sold in 123 days Sold for $56,206, 20 year mortgage @ 11% Monthly mortgage payments are at $575.00
310 E. Trail St., Jackson MI, Sold in 67 days Sold for $41,796, 13 year mortgage @ 9% Monthly mortgage payments are at $450.00
1079 Arlington Ave., SW, Atlanta GA, Sold in 74 days Sold for $40,227, 10 year mortgage @ 10% Monthly mortgage payments are at $525.00
The questions to ask yourself is this investment strategy for you? Does it make sense to buy investment properties in small quantities for pennies on the dollar, while enjoying the same bulk discounts that major players receive when they buy 8 Figure BulkREO packages from large banks?
Small Bulk REO investing seems to be the answer. Making an above average cash on cash return has never been easier.