There’s more than one way to profit from the current real estate market, however experienced investors are increasingly choosing distressed property notes over foreclosure auctions or REOs. Why?
4 reasons distressed property notes trump REOs in 2012:
1. Not as Much Competition
There are literally billions of dollars out there chasing REOs right now. That means hundreds of investors fighting over the properties which do come on the market, and banks becoming increasingly difficult to deal with. This has already resulted in cranking up REO prices by almost 10% in the last year, while retail home prices remain mostly flat, killing returns. Huge finds might not mind generating a measly 4% return, but for the rest of us that’s hardly worth getting out of bed for.
2. Less Aspirin Required
Despite the warnings, many investors are so desperate to acquire REOs they aren’t completing their due diligence and are quickly discovering just how much they underestimated what large headaches repairs and property management can be.
3. Leaves the Gambling to Someone Else
With distressed property notesit doesn’t matter whether or not the real estate market really goes up as rapidly as hoped. It’s also of no concern if it stays stagnant with modest growth. And it’s not even a problem if it becomes almost impossible for buyers to qualify for mortgages. Buying mortgage notes is all about income, and there is no need to worry about having to sell the property in order to profit.
4. Eliminates Expenses That Soak Up Profits
Millions may have been made from rehabbing and flipping foreclosure properties, but the actual net is often a lot less than anticipated due to a ton of closing costs on both ends, huge repair budgets, marketing expenses, and lawsuits from troublesome tenants. Buying distressed property notes eliminates all of this.