REOs (foreclosed properties, “Real Estate Owned”) have been big business for several years now. But what’s been happening the last few months may be an indication that the foreclosure market will be opening up.
Big firms already in the business of managing REOs are acquiring smaller ones. Banks are signing deals with management companies. Companies are re-branding themselves to focus on what they see as the growing business of moving REOs. There’s even new software on the market to help automate the sales of REO properties, assets owned by banks or other financial institutions.
So what does this expansion of the REO management industry mean? Is this an indication that the huge inventory of REO properties sitting on the bank balance sheets are going to begin getting released onto the market?
Some of the “experts” don’t think so. A recent report from RealtyTrac says paperwork delays will push up to a million foreclosure filings from this year to 2012. That’s on top of a projected 2 million this year and 2.9 million last year.
But there are also a lot of business signs pointing to a more steady release of REO properties coming later this year and into 2012.
It might not be happening tomorrow, next week, or even next month. But the way businesses in the industry are investing their money points toward the increasing availability of REOs later this year and into 2012.
An increase in REO supply is a good thing if you’re a real estate investor. But don’t expect a flood of new REO properties to suddenly hit the market, which could trigger a further decline of housing prices – by 10 percent or more – from their current floor. Neither the federal government nor the banks are going to allow that to happen.
But that’s OK. As a real estate investor, I have lots of tactics my students are using to make money in this market. Many of these tactics fall into two strategic categories:
In both cases, this is a GREAT time to be a real estate investor. Streamlining the release of REO inventory will only help the market get better for us.
As flippers, real estate investors make money on the spread between a property in disrepair and what a rehabbed home would go for. Of course we’d like to see market appreciation of the property at the same time. But because the profit is made on the spread instead of appreciation, my students are making money as this market continues its bounce along the bottom. And as we make profits, the real estate market is stabilized with fully renovated homes where boarded-up properties would otherwise be.
And as cash flow investors, we now are able to pick up long-term-hold properties for pennies on the dollar. As the rental market continues to heat up in the coming years, that will bring excellent ROI with long-term equity appreciation while we satisfy the market demands of people who can’t qualify for a mortgage.
Streamlining the release of REO inventory will make things better on both counts . . . IF you have the right tactics and strategies in play.
Watch ALL the signs the market is giving you, not just what the mainstream media decides to throw at you. Get ready to take action, because business is going to be even better than it is right now as the backlog of REOs is freed up.