Found REO that's not on market - Posted by Keith

Real Estate Investing Duplexes
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Posted by John Corey on October 02, 2006 at 03:38:33:

Three observations. This will not be a complete answer to the full question.

  1. When a bank is the owner focus less on what they would save when there is no agent is involved. The people making the decision are mainly employees. They can lose their job if they do not follow the rules. If the bank saves money that is the bank and not them.

The bank is small but it still might have to make sure that it obtained a fair price but putting it on the market with an agent. Also if it is being managed then in some states that person managing it is a licensed agent and not a bank employee. Do not be surprised if the commission is a non-event in the overall scheme of things.

  1. You imply you want to sell a duplex close by because of a poor ROI yet you are talking about buying another. Are you focusing on the math and the return on your cash invested vs. how the property performs otherwise?

  2. The 1031 angle is the debt on the property you are selling is higher than it would be now. You need to find a replacement(s) that has the same or higher debt level. Hence you are pushing up the debt level on the next property. That might be a problem or it might be fine.

If you get into this property for a discounted price, make the repairs and get it rented you could look at a no-seasoning refinance. Check before you even start about this. Or have the bank agree to do one as part of the sale. The idea being to pay off the 2nd by tapping into the equity on the new property once you are on title.

You could also bring in a partner for the new property. Or you can flip the property after fix up. Sounds like you will be selling the one close by in any event.

Question.

What is the problem with putting cash into the deal? Is it you lack the cash, you just want to push the leverage to the max or some other point?

John Corey

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Found REO that’s not on market - Posted by Keith

Posted by Keith on October 01, 2006 at 11:21:20:

I own a duplex and there’s one on the same street that has been bank owned for about a 18 mo’s. It’s a small local bank and they have been managing it. The duplex’s are approx. 6 yrs. old in a good area. The value is about $250-260k. I think I could buy for around 200-210. There have been 3 other reo’s that have sold in this price range over the last 24 mo’s. But if I buy from them directly they are saving 6% in realtor fee’s. It’s in good condition on one side, the other side will need carpet and paint. These duplex’s rent for $2200-2300/mo. total, both sides.
I am looking for ideas on financing. I can’t really do a construction loan because it doesn’t need much work. But I don’t want to put a bunch of money into the deal based off the sale price instead of appraisal price. I could talk to them about using equity on my other properties to use as down $. but I might want to sell my other properties soon and do a 1031 exch. because of low ROI. If I have a second on the house I’m selling on the 1031 that is tied to a different property how would that affect the 1031? Just searching for options to see if I am missing something. how creative will a small bank be willing to get. My beacon scores are 750+, I have great income from regular job, and decent equity in other properties. Just trying to acquire properties without tying up much cash. Thanks