Wholesaling Bank Owned Property in 2013
By Sean Terry
Wholesaling bank owned REOs has been the source of an immense amount of business and millions of dollars in income for real estate investors over the last few years, but what does the landscape for flipping these distressed properties look like for 2013 and beyond?
Is wholesaling bank owned property still a viable real estate investment strategy, are we at the end of the game for flipping foreclosure homes and if so what's next, going back to the 9-5 grind?
Flipping Houses for 2013 and Beyond...
Despite massive improvements in the U.S. housing market during 2012 and significant gains expected for the next 12 months, investors will be pleased to know that there are still many foreclosures in the works, providing fuel for flipping many more houses.
The pool of distressed properties working their way through the system to become product for those wholesaling bank owned REOs is far larger than the visible number of REOs on banks' book today. It's far larger than the numbers of homes seen going to foreclosure auction in the last couple of months and even much greater than the estimated 70% of distressed homes hiding as shadow inventory today.
In fact, Bank of America just revealed that they alone are holding a massive $64 billion in delinquent home loans on which borrowers are more than 6 months behind on payments, on which they haven't even begun the foreclosure process yet. That's far more non-performing paper than even the world's richest man, Carlos Slim could buy and that's just at Bank of America.
At best the numbers show we might be half way through processing foreclosures from the crisis. This means at least another 4 to 6 years of wholesaling bank owned homes, if not far longer.
Access to mortgages ought to begin getting better in the New Year too, making it even easier for investors to ramp up their volume. However, changes in the rules are coming and investors need to anticipate them.
As lenders and the government begin to believe that they need investors less they will continue to crack down and make it tougher to do some flips. This is already being seen in the paperwork coming out in short sale packages form major financial institutions.
Ultimately some real estate investors will find pooling money to buy in bulk or even going after distressed properties early as mortgage notes a great move.
Adapting to Real Estate Trends
So we may have plenty of foreclosures to go around for wholesaling bank owned homes for years, and this pool may even grow bigger as short sale incentives decline. However, investors need to have a longer term game plan.
If your only game and strategy is flipping REOs you are going to find it pretty frustrating when they do eventually dry up, whether that is 14 months or 40 years from now. Understand that there is plenty of profit to be made without foreclosures and how you can successfully wholesale in this type of market and you will be ahead of the game.
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