Update: This home closed a few days ago at the end of August. As you recall the property featured two units on a lot and was listed for $399,000. The final selling price was $500,000. As we continue to see more and more bank owned properties, lenders are opting to “fire sale” their inventory. Listing a property at a very low price creates a lot of interest, allowing the bank to choose from several different offers, finding a buyer in a very strong financial position and one who is also eager and can close in a short time.
As stated before, bank owned properties can offer an excellent value. If you want to pursue these limited offerings you have to be ready with a complete offer package, so you can eliminate any hesitation a bank may have about doing business with you.
My advice is to establish a relationship with a bank and a local Pasadena real estate agent who understands what is needed to get your offer approved. Provide your lender with all of the necessary information required so that they may close your transaction in as little as two weeks.
Original Post
I am starting to see some tremendous opportunities in real estate. Many of the properties beginning to come on the market offering instant equity belong in the category of bank owned. 
This one is no exception. Some banks are taking a very aggressive approach to reducing their inventory and offering substantial reductions in price. There is an old saying in real estate “You don’t make money when you sell, you make money when you buy”. That adage just might apply here!
This property just listed for sale at $399,900 features two houses on one lot. The front house is a 3 bed & 1 bath and the back house offers a 1 bed / 1 bath with kitchen. Total square footage is 1864 and the lot size is 8429 sq ft., according to assessor’s records.
Cash Flow
Looking at some hypothetical numbers, the two units should rent for $2700/month ($2000 & $700). With a 20% down payment, you would finance $319,920. At 6.5% interest you monthly principal and interest payment should be $2022. Add annual taxes and insurance of $6000 ($5k & $1K respectively) and you add another $500 to you monthly payment for an approximate amount of $2522. This does not include a vacancy allowance, miscellaneous repairs or other improvements.
I have not seen a property with an estimated positive cash flow in quite some time. The reason is that we experienced unprecedented appreciation from 2000 to the beginning of 2006. Values rose from 10 to 15%, and maybe even 20% in some years. Rents on the other hand increased much more slowly form 3 to 5%. As a result income property (and probably residential property too) got way out of hand. Unless you had a down payment of 50%, you probably were not going to find a property with a positive cash flow. Now things are beginning to change. With values declining, foreclosures rising and banks liquidating, opportunities are beginning to surface.
If you would like to have the latest up2date information, email me. We will notify you the next time we see a property that qualifies for “Price It Low & Watch It Go”.
About Doug Willis
What You Have To Say