Who doesn’t want a piece of the distressed property and REO pie right now?
It’s big and sweet and there has never been a better opportunity to lock into such wealth or discounts. However, far too many investors and distressed asset buyers are finding themselves on a wild goose chase with little in real, cold hard cash to show for their efforts.
Sound familiar? Improve your acquisition strategies and profits in six steps.
1. Home in on the Most Motivated? Sounds simple, right? However, the most motivated holders of distressed properties may not be who you think they are. Many homeowners have turned down tens of thousands of dollars in relocation funds to complete short sales and move out. They either don’t believe they will actually be evicted or just can’t bring themselves to walk away. So, let’s all march into Wells Fargo and ask for a list of all the foreclosures they have, right? Maybe not, the biggest banks are often among the least motivated. Remember, the government won’t let them fail and they can keep on getting the law changed or making deals to stay alive. Now, if you were to home in on some of the smaller banks, those who have seen an increase in the number of non-performing loans turning into actual REOs, then you may be on to something. They don’t want these properties. They are bleeding them dry and they need to re-capitalize.
2. Find Those Who Are Actually Selling It may seem odd, but even some of those who are holding many millions in REOs and non-performing notes aren’t selling or can’t sell. How do you know who is selling? With the right software and access to detailed data you can look at indicators like charge-offs and ‘non-accruals’ sold as well as reports for net losses or gains on REOs.
3. Focus on Those Who Are Easiest to Deal With Despite their need to sell, and sometimes desire to sell, their distressed assets some are completely unrealistic and out of touch when it comes to negotiating. Others have systems which are just too complex and messy to facilitate fast and effective deal making. Why waste your time? Find the great ones and build relationships. Where can you gain access to higher-level decision-makers who you can actually make real, win-win deals with?
4. Be Open to Different Property Types The news headlines and many real estate investing blogs by some so called ‘gurus’ shamelessly promote all types of things, either because they are copying others who are wrong, don’t see the big picture, or are trying to purposely throw other investors off of the trail of the best deals. Look at the data and make your own decisions. If you can get better deals per door on multifamily, then why not go that route? If commercial REOs in your area are being offered at decade lows and you know they are going to bounce back soon, why pass it up?
5. Be Ready to Move Fast (and Wait) Dealing with banks is rarely fun. As they say “he who holds the gold makes the rules,” and that’s the mantra they work by. Expect stalls in the process when negotiating, but don’t put down dollars you need an immediate return on unless you have a solid timeline committed to. At the same time, you are only going to kill potential relationships and your credibility if your offers are accepted and you don’t have the cash ready to go.
6. Stop Chasing Pennies and Lock onto the Real Loot! In the same amount of time it takes some investors to find one real deal, others have contracted for dozens or hundreds. Spending obscene amounts of time, or even marketing money on finding attractive acquisitions, is not good business. Find a few reliable sources and let the deals flow.