Real estate tips and tricks from Armando Montelongo
What the Growing REO Management Business Means to Real Estate Investors
There’s been a big burst of activity in the REO asset management business recently. And that could mean some big changes for real estate investors.
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.
A Big Move in REO Supply?
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.
- Stewart Lending Services, a subsidiary of Stewart Title Company, recently bought majority ownership in PMH Financial, which provides a wide range of REO services. PMH has an inventory of around $2.5 billion, working on behalf of financial institutions, investors and loan-servicing companies. It has 100 employees around the country. Stewart, clearly, is getting ready to be a bigger player in the REO business.
- First American Financial Corp., already a huge part of the real estate and financial services industry, is developing an REO asset management firm and hiring people to fill dozens of roles.
Homeland Security Capital Corp., a government contractor in a range of areas, recently bought Default Servicing LLC, which provides REO liquidation services from property inspection to broker assignments to closing services. - Just this week, Executive Asset Management, the REO management branch of Default Resource, signed an agreement with United Bank to handle the REO process for the bank, which is acquiring assets from failed financial institutions.
- DRI Management Systems Inc., a maker of real estate software, has released a program designed to speed up and reduce the costs of resolving REO assets. Much of the process right now is done on paper.
- Even regional firms are getting involved. A company called Helios Capital LLC has re-branded itself as Helios Capital Advisors to focus on building its position in REO, investment and commercial loan sales.
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.
Profiting as a Real Estate Investor in This Market
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:
- Flip (renovate and resell)
- Cash flow (buy and hold)
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.
thanks for staying in touch with your students! my brother Brian and i attended the March bus tour..yellow bus
Armando,
Please come back to Seattle soon! I missed your training last week and am crying.
Thanks.
Linda
What books do you recommend your students read. I had heard of one called something like “mastering the art of mastering the deal”. Do you know a book like this, if so, what is the actual title and who is the author?
Hey Armondo I love your shows. And I am just starting to get started in realastate. I am working o my credit and getting ready to rock and roll with you guys out there. What I need to know is how can I fined a list of buyers. Cause the list of hard lenders are not working for me. Thank you for your time. Nick
DO YOU BIRDDOG??? DO BACK TO BACK TRANSACTIONS? CAN WE PARTNER WITH YOU, FIND THE DEALS AS A FINDER AND YOU SPLIT THE COMMISSIONS? LINDA HORNICKEL CELL 570-236-3399
Armondo, first it is pleasure to hear from you and your success in the industry.My thing is that I have the crappiest credit and no money to go forward. I have a cleaning company in Tampa, Florida with my wife, we have done the property preservation and we got tired of getting screwed over by companies where we did all the work and getting paid peanuts where they almost buried us to nothing, we had to cut ties with these companies but we love doing the trash-outs. I have pride in our company and I have to get more work to get back on track. I know there is money in this industry but I feel I have got to have cash to have someone take me seriously. Our company has done construction cleaning, commercial cleaning, residential and property preservation. We are family owned and operated and take pride in our work, now my question for you is do you think I could get over this credit situation and cash to get started in buying and flipping homes? with or without using credit or cash? where can I share the wealth?
Armando,
When are you returning to TV? You and Veronica are inspirational to those of us who are serious about the business of real estate. I’m so very tired of the comedy partners in Atlanta who want to be flippers and don’t have a clue!
Helllo Armando,
One thing that I have seen, starting to happen here in your area, is a price change. Banks are stating to change listing prices to a higher amount. Example, the property is listed at $110,000, the bank then re-lists the property for $125,000 or more. In some cases not accepting the listing price offer but, setting a price that is higher than the listing price. This all makes things exciting.
We are finishing up a property that will go on the market the first week of August.
Thanks for all your help
Bob Monahan
Thanks a million for the information Armando. This is the area I branched my business out to and have been working in it now for the last six months or so, working with and selling “Wholesale Foreclosure Rehabs” in their as is condition to interested investors/buyers. I will definite look deeper into the supply and the demand of the REO market.
I know that there is profits and business to be gained there
Cheers,
B.Lowry-Deal
Hi Armando!! It was great meeting you and your familly! and hearing your testamony! and meeting alot of your staff at the bootas on the ground in salt lake and in Denver my fiance’ and I live in Aurora Col. near Denver went to your bus tour in california it was awsome!! it was in September! before the bus tour we had put in over I believe it was over twenty Five offers and then after the bus tour the fallowing week about fifteen more! then a total of over sixty five! heard back on some! We did not give up!!! and we finally got one excepted in December! we closed on it in jan. rehabed it put it back on the market after three weeks of fixing it and we sold it in about three months! I brought in a cash partner that lives in Minnisota that also been to your bus tours etc. and we got back everything we invested!! plus about 11,000.00 so we split that! and we were happy!! for the first one!! we have been putting in more offers and we looking at 10 this weekend! I have been having a weekly phone meeting with Damon Hudson and he has been awsome great coach- Mentor. thank you for all that you do!! I will never give up!!! cant find the spelling!! Adam Brown
hey thank you Armando
Thanks. Very encouraging article. Every now and then you just need a little boost to keep you going in the right direction. This refueled, reenergized and reconnected me to the business at hand. BECOMING A HOUSE FLIPPING MACHINE. Once again thank you for keeping in touch Armando.
Armando,
Once again I thank you for all the great content you share with us. I always look forward to hearing from you!
God bless you,
Elena in AZ!
Thanks again for staying in touch. Also, I am looking to add a few more people to my buyers list. I am an active wholesaler in the Houston,Tx area. If you are interested, email me your info.
GO GREEN BUS !!!!
Jay Flores
inhoustoncashbuyer@yahoo.com
Great blog. Love the new page you created.
Ciao Armando, much thanks to you and your staff on keeping in touch with me. Gino Colucci,…………… San Francisco