subject: How to Make Money in Real Estate: Buying REOs [print this page] According to veterans in the housing business, you make money in real estate when you buy houses, not when you sell them. This simply means that the key to real estate success lies with the type of properties you invest in. Therefore, if you want to make it big in the housing business, you've got to invest in properties that have high profitability and marketability even before they have been repaired and renovated.
A good example of such properties is a bank owned home. Also known as REOs (real estate owned), bank owned homes are properties repossessed by banks and lenders after a homeowner defaulted on his loan. Like foreclosed homes, they have undergone the foreclosure process but didn't get bids at auctions. Because banks are not in the business of owning real estate, REOs are being sold at prices way below their market value.
If you want to make money in real estate by flipping or rehabbing real estate owned homes, here are the things that should do when buying properties form the bank:
1. One of the perks of buying bank owned houses is that they can be inspected prior to their purchase. This is something that you should take advantage of as it can help you ensure that you're betting your money on the right property. So before you make an offer to the bank, see to it that you have taken a good look at the house you want to invest in.
2. When making an offer, make sure that you will include the property's estimated repair cost. This will support your initial bid to the bank. And if you're going to secure financing to buy the property, it would be wise to get a preapproval letter from your lender.
3. Don't be afraid to negotiate because it is quite likely that the bank will submit a counter-offer to your initial bid. And although prices of bank owned homes are mostly non-negotiable, there are instances that banks may be willing to accept your request lower the asking price or to extend your contingency period among other things.
4. When you have reached an agreement with the bank or lender, see to it that you close the deal immediately. It is no secret that there are many people who are after REOs. Therefore, it would be wise to seal the deal with the bank to prevent other investors from snatching your property away.
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