subject: For The Foreclosure Investor, Are Short Sales Worth The Hassle? [print this page] For The Foreclosure Investor, Are Short Sales Worth The Hassle?
I have been asked many times why I like working short sale transactions.
My answer to this question is easy: It is the easiest of the real estate models to set-up and duplicate (local and out of area) and it requires no money of your own or maybe no private money. Done correctly, you do not risk any money.
If you are double-close flipping, you'll most likely need the so-called 24-hr flash cash--it is plentiful.
However, I am always looking for any transaction that adds to my bottom line. We have done many types of transactions. Below, I'll lay out a few techniques with the pros and cons.
Short Sale
Pros
No personal Money
No Private Money (maybe)
Can be No Risk
Easiest to duplicate
Various exit strategies: Debt Negotiation Service Fee; Double Close Paper Flip; Buy, Fix and Flip; Buy, Fix and Hold
Cons
Dealing with Banks
Dealing with various State laws
Turbulence in Market
Low Time Intensity
May need Flash cash on Flips
Subject-To
Pros
Easy to Get
Lots of Sellers
Cons
Easy Transaction A free deal costs about $5000
Almost Never Equity
Negative Cash Flow
Lots of Short Sales come from Sub-tos
Risk to own
Low Time intensity
Need Private Money
Fix and Flip
Pros
Lots of REO properties
Can be overall Good Values
Easier to buy than Short Sales
Cons
A lot of investor competition
Need hard and private money
Risk to own
Low retail sales price
Very hard to build system
Very Time Intensive
May turn into rental
Wholesale Flip
Pros
Lots of REO Properties
Can be overall good values
Easier than to buy than Short Sales
Cons
May have to risk $1000 per offer
Not supposed to flip REOs
Lots of time involved to analyze property and bid
Free and Clear
Pros
Can be Big Paydays
Almost no competition
No Banks
Cons
Unmotivated Sellers--Typically seniors who are not interested in selling
Expensive marketing
Slow to attract and very slow to cash out--years
Need lots of long term private money
So if you are a beginning investor and like the idea of risking nothing and getting paid at the close, short sales can be very good. If you are a seasoned investor and you would like another income stream without doing the mitigation yourself, check out our site. We mitigate many deals for other investors.
The key point is to understand that we have to be ever more diligent on calculating the offer. Note, formulas used to calculate offers on long-term hold real estate are not at all related to fix and flip formulas, and these deals are normally disastrous for the unsuspecting investor.
We talk much more about this in the What2offer mentoring program. After years of doing these calculations by hand, my partner and I have developed an online real estate software to make our lives much easier. We can now crank out offers and determine the exit strategy in seconds.
