Saturday, July 23, 2011

Transaction #3 of 52 in 2011: Deep Discount for REO 4-Plex

Small, multi-family properties have been hit hard throughout the country. In Utah the duplex, tri-plex, and four-plex prices have been hit much harder than single-family homes.

Why Multi-Family Has Been Hit Harder than Single-Family in Utah
The answer is quite simple: Supply and Demand. The supply for multi-family residential is growing as investors try to divest and other investors have problems and the banks foreclose.

Demand is down for two reasons:
  1. People feel that real estate is not a good investment right now- even when it is on sale.
  2. Credit is more difficult for multi-family purchases. Banks are asking for 20% - 25% down. Most banks require this to be cash. Credit needs to be 700+ for most banks. Finally, the new rules limit investors to four properties so active investors that have cash and good credit still won't qualify.
We Make a Bid We Couldn't Refuse
After searching the MLS for properties, we made an offer on a 4-plex. The purchase price plus estimated fix-up was HALF of what the property would have sold for 2-3 years ago.

The bank accepted the offer.

The property will cash flow for years to come.

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