If your market is anything like mine here in Los Angeles or in many other parts of the country, it’s in the middle of 2-4 Unit REO Madness. Now more than ever it’s time for you to take advantage of this market to secure your financial future and start building that passive annual income stream. 2-4 unit properties everywhere are being sold as Short Sales and REO’s at prices not seen since the early 2000’s. And if you’re willing to venture into lower-income neighborhoods (what I call C & D’s), you can find properties in the 5.5 -7.0x GRM range, guaranteeing your client a 10%+ cash on cash return against today’s current financing.
Remember the Golden Rule is to make sure that properties debt cover even or better so that you have enough money after paying for taxes and expenses to cover the mortgage payment. And the lower the GRM the greater the cash flow. Be prepared for many properties in the $250,000 and less range to sell very quickly, over asking and in many cases ALL CASH. The market is moving very quickly right now so make sure you are prepared to act quickly and visit properties within a day or two of them being listed on the market.
And once you’re lucky enough to have an offer accepted by a Seller on a Short Sale, be prepared to be patient. The process can take 30-60 days or more and can be frustrating. So continue looking for deals while you wait to hear from the Negotiator as to what the lender will do. Don’t be surprised when they ask for more than you’ve offered and remember it’s a negotiation. You’ll win some deals and some you’ll walk from. It’s part of the ‘fun’ of dealing with Short Sales. If you aren’t up for the waiting and back and forth steer clear of Short Sales and deal only with Foreclosures/REO’s and normal sales. This will guarantee a smoother experience.