First, Why Buy REO’s?

Because REO properties or bank owned foreclosures, will be the easiest properties to acquire and locate and therefore the best properties to start your real estate investing career with.  REO homes have already been through the foreclosure process, they have been returned to the bank, and are being offered with clear titles with no negotiating necessary other than the price.  Real estate investors interested in starting a fix and flip or fix and hold business should focus their initial efforts on construction cost control and marketing of their affordable housing rather than spending three to six months using creative techniques to find a property for $5K to $10K less than what is already on the MLS.  These savings will quickly be lost when the unprepared investor winds up blowing their construction budget or holding on to the property for an extended period of time without a buyer or tenant.

Beutiful REO home on the outside

Even Seasoned Rehabbers still concentrate on REO’s

Making money in real estate does not have to be fancy or complicated.  When rehabbing for quick profit or long term cash flow, the goal should be to find decently priced properties that cash flow with little to no money down.  You will accomplish this by using other people’s money for the purchase and repair, and then cashing out the invested money based on the end lender’s LTV guidelines on rehabbed properties.  Especially in this buyers market, bank owned properties can be obtained within the rehabber’s required target price range with little headache. There is no need to get fancy in order to obtain cheap foreclosed homes to fix and flip.  Focus on controlling construction costs and the exit strategy.

Second, Why Buy Single Family Homes and not Multi-units?

Single family homes are the easiest properties to rehab, rent, and profit from with more exit strategies than any other type of property.  Enough said.  Yes, it’s true that when a tenant moves out the house is a 100% vacant, unlike a multi-unit with several units paying rent.  But many times the tenants leasing well rehabbed homes will stay longer and be less of a hassle than the tenants in apartments.  Single family homes also have the largest pool of potential buyers when it comes time to sell.  Potential buyers include the tenants themselves who may be eligible to purchase the house, another real estate investor looking for steady cash flow, or a homeowner looking for an affordable home in good condition.

In the “flip this house” business, single family homes are the bread and butter of quick profits and long term cash flow.  Look for 3-5 bedroom homes with decent size bedrooms as your target properties.  These freshly rehabbed homes have the largest pool of potential buyers and renters in the market place.  Rehabbers providing affordable housing are in great demand in many if not all urban areas across the country.  Check to see if your city’s section 8 voucher program has a waiting list; many areas across the country do.  Buying foreclosures, fixing, flipping, or renting for cash flow is not that complicated when you stick to the basics.