According to one survey, 12% of Americans were investing in real estate. If you’re thinking of getting into real estate, you need to check out REOs.
A real estate owned (REO) is one of the latest real estate trends, and if you’re investing in property, you need to know about it.
Keep reading to learn all you need to know about managing an REO property, including preservation and maintenance.
What Is REO?
An REO is a listing for a house or property that didn’t sell during the foreclosure process. Because it didn’t sell, the mortgage lender, bank, or mortgage investor now owns that property.
If you want to buy that property, you’ll have to go through a special REO agent or a type of action platform. These properties are normally sold as they are without any maintenance or repairs done to them. However, this also means that they’re normally discounted so that they can sell as quickly as possible.
You’ll have to find out who owns the property and find a way to contact them through the agent or the auction platform.
While this might sound like a great deal, keep in mind these houses normally have major issues. A foreclosure only happens when people can’t keep up with their mortgage payments. If the owner couldn’t keep up with the mortgage payment, they likely didn’t keep up with any renovations to the property as well.
Pros to REO
There are many different advantages to buying one of these properties. One of the first advantages is that it’s actually cost-effective and can be great for first-time home buyers or new real estate investors.
That’s because they’re sold at a discount since they couldn’t be sold anywhere else. Another benefit is that when you purchase a house that was in foreclosure, there aren’t any liens on the house.
This means that you can buy it without having to worry about any old titles or outstanding debts being attached to the property.
In addition, many lenders want to get rid of these REO properties as soon as possible. If they sit on the market for too long, the lender will just keep losing money.
This means that they may be more motivated to sell the house faster, even if they do lose a little bit of money. Because of that, you can normally make a bargain for the house, even when it’s already discounted.
You likely won’t have to do a lot of negotiation either, which saves you a lot of time.
Cons of REO
One of the disadvantages that come with REO properties is that they’re only sold on an as-is basis. That means what you see is what you get, and there won’t be any renovations or maintenance done before you buy it.
You’ll be responsible for the renovations or new maintenance once you buy it. You should still have a home inspection to see what issues there are and prepare financially for any upgrades that you might need to make.
For example, if the property was really neglected, it might not even be habitable. You’ll need to assess the costs of hiring contractors and doing repairs to make sure that it’s livable again.
While it might seem great to get a home that’s cheap, it can end up being the same price as a new home if you need to do extensive repairs.
Also, keep in mind what type of home you are buying. If you are buying a single-family home, there won’t be any tenants in the home. However, there could still be tenants in a multi-family home.
You could end up unintentionally becoming a landlord, which can come with its own set of problems. So always take precautions and research the type of REO that you’re going to be buying.
What Maintenance Do You Need to Do?
This will entirely depend on the state of the property that you decide to buy. In general, you might need to start removing any debris and cleaning the area. You’ll want to make sure that contractors have enough room to move around without hurting themselves.
Next, you’ll also want to secure your property. This will ensure that no squatters end up on your property and use it while you’re renovating it.
You’ll also want to make sure that if you live in an area that gets cold winters, you’ll want to winterize the home. A contractor can do all kinds of winterization services, like preparing the plumbing and heat systems so that they don’t get damaged.
When you have the right maintenance done on your home before you rent or sell the renovated property, you can actually increase the value of the property and make money.
It’ll also make sure that you extend the life of the appliances that you spent money putting in. It could save you money along the way too, and reduce the need for emergency repairs that would pop up if you didn’t do continuous maintenance on the home.
Lastly, you’ll have less stress knowing that you have good control of your property and have contractors who can take care of and maintain it.
Learn More About REO Property
These are only a few things to know about if you’re interested in purchasing REO property, but there are many other things that you’ll need to prepare for.
The biggest thing you’ll need to prepare for is all of the maintenance and upkeep you’ll need to do on the property.
Thankfully, we’re here to help you out. If you’re interested in finding a contractor to help you improve your REO property, contact us today!