Real estate-owned (otherwise known as REO) properties are becoming more popular for those who want a slice of the real estate pie in a highly competitive seller’s market. If you’ve been on the hunt for a profitable and fairly simple investment idea, purchasing REO properties may be something you want to try. While it’s not for everyone, many people enjoy the hunt, the excitement, and the rapid rewards associated with flipping real estate-owned properties in West Palm Beach.
If you’d like to give this type of investing a try, here are five steps you should follow. These steps will help you find and purchase real estate-owned properties quickly so you can flip them for a profit.
Understand the Benefits of Investing in REO Properties
Before you jump into the world of REO investment, it’s important to understand the benefits (and potential drawbacks) of such a decision. Here are some of the top advantages of investing in REO properties:
- They can be acquired quickly and easily if you have a reliable lender.
- They are often in good condition and can be easily updated and sold for a nice profit.
- They don’t have outstanding taxes or title liens, since these are typically covered by the bank that is trying to sell the property in question.
- They are usually cheaper than other property types because banks don’t want to keep managing them.
But even though they’re associated with many benefits, REO property investments can also have some potential drawbacks. They include:
- It can take time to close on an REO property and you may have to play an aggravating waiting game.
- REOs are always sold as-is, which means you may end up with high renovation costs to make the property sellable. This can be avoided with a good inspection before closing.
- It can be challenging to obtain quality REO properties because they sell so fast and are not always listed like other homes.
- It is more likely for REOs to be located in less-desirable neighborhoods.
To make sure you get a good return on investment when purchasing an REO property, it’s important to do your research and make sure you can sell the home for a profit.
Analyze the Property and Its History
Not all real estate-owned properties are worth investing in. Since the REO market tends to move quickly, it may be tempting to hurry and purchase any REO properties you can find, without doing your homework first. But this could be a costly mistake.
Remember, properties aren’t worth a penny more than what someone is willing to pay for them. Before you sign any paperwork, take some time to look at similar, recently sold homes in the same neighborhood over the past three months. Then, ask your agent to find out the lender’s purchase price on the Sheriff’s Deed or Trustee’s Deed. Once you have this price, you can compare it to what the lender has listed.
If the property is under-priced, you can make an offer between the foreclosure sales price and the original mortgage balance. This will give you an advantage when it comes to winning the property over your competitors.
Submit a Proof of Funds Letter
If you have funding set aside to buy an REO property, submit a Proof of Funds letter to the lender. This could speed up the loan process by showing you’re serious and aren’t wasting anyone’s time. Lenders prefer to work with investors who are already approved or pre-qualified for funding.
Speed Up the Inspection Process
If you can speed up the inspection process, it will help you get the property you want quickly. It will also help you get funding more easily because speeding up inspections shows you are serious and want to get things done efficiently.
Keep in mind that speeding up the inspection process does not equate to cutting corners or doing things dishonestly. You never want to bring your integrity into question when purchasing an REO property.
Get Fast Funding
Without a reliable source of funding, no one is going to take you seriously and you will probably miss out on a great opportunity to get your hands on REO properties in West Palm Beach. You need financing to take advantage of the best real estate opportunities. Get the hard money loans you need from HML Solutions today!