Is Wholesaling REOs Still a Viable Investment Strategy?
Some newer real estate investors are in a panic over their inability to land as many REOs for flipping as they would like. So is this the end of wholesaling REOs as a viable investment strategy or even the end of the small real estate investor altogether?
The fear is almost understandable. Newer investors have been incredibly spoiled over the last seven years, with more distressed properties than anyone could handle. Now there are a few less. Realtors are reporting distressed sales are making up less of a percentage of total home sales and the big players are wading into foreclosure auctions willing to over pay and bullying the little guys out.
However, before letting the panic take a hold of you, let’s clarify the issues and really put them into perspective…
1. REOs Aren’t the Only Game in Town
In fact, foreclosures of any sort have typically been a tiny slice of most investor’s businesses over the long run and were virtually non-existent during recent boom years.
2. Auctions Have Been Dead for Decades
In reality, auctions have been a waste of time for most investors for decades. They have always been controlled by a handful of local veterans and are certainly not the only place to find deals.
3. Distraction is Good
Let the other players bicker over these deals among themselves and overpay while you are able to head off and find better discounts without the hassle of so much competition.
It is also critical to remember that while banks and government agencies are throttling back on the flow of the properties they are holding to artificially pump up the prices of these non-performing assets, foreclosures are still rising in many areas of the country.
In fact, RealtyTrac reports that 65% of the nation’s housing markets are in even worse condition than back in the pit of the crisis in 2008. That means plenty more distressed properties to hit the market and even if sellers have been stubborn and try to hold on, they will eventually have to fold or be evicted. Plus, this doesn’t even count the vast bank of shadow inventory being held off market already.
So, the supply is there even if foreclosure auctions, or walking in the doors of major banks asking for these deals, is no longer the way to go for those wholesaling REOs, and the demand is out there too.
Many other investors need wholesalers to flip homes to them. Plus, flipping homes to retail buyers will get easier with more demand and confidence growing in the market, meaning investors won’t need to work so hard to find such big discounts in the future.
The bottom line is that, in general, the market is headed up, which is good news all round and makes it much easier to wholesale, whether it is REOs or not.
So, there is no need to get discouraged and investors should be pumped up about rolling into the start of a new boom in the next 12 to 24 months, which brings the opportunity to create massive wealth.
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