Going Against the Grain, Investor Finds Bank-Owned Bargains Galore
Despite the abundance of negative buzz surrounding the real estate market, Kirk Leipzig decided to pursue foreclosures as investment properties.
He has found that decision to be a very good one.
"I just bought two brand new homes as REO from the bank," said the Tennessee-based investor in December. "I am buying five more new homes next week from the bank. I am buying $750,000 homes for $450,000.
"This is the time to buy, and to make a killing out there," continued Leipzig, who's been a RealtyTrac subscriber for about nine months. "But you need to totally understand your market and educate yourself daily on your market. Then go buy, buy, buy."
What's most surprising about Leipzig is that he is not buying and holding as many experts recommend in a down market but buying and flipping.
"All the properties I currently buy are for flipping only," he said, acknowledging that he always has a backup plan because of the difficulty selling in the current market. "I always buy a property now to flip, but in the back of my mind I know I can lease-option it, or rent it if it does not sell as quickly as I would like."
The two properties Leipzig most recently purchased were appraised at $700,000 and $750,000, but he bought them for $450,000 each, giving him enough room to "fire sale them out and make a great profit easily."
"I went in and did a punch list, and staged them, and they are beautiful 4,200 square-foot homes in the best city in the county. I have an offer on one of them now, and I just put them on the market one week ago yesterday," he said. "I will make, after realtor fees, holding costs, closing costs, etc. $185,000 in two weeks. Plus the new homeowners will have $75,000 equity in the house immediately. Everyone wins, and that is how you sell in this market. Find the win-win and everyone truly will win."
Leipzig emphasized the importance of buying right in order to sell effectively, noting that investors should find a well-performing area and then stay focused on that area. On his prospective purchases which are in the $300,000 to $700,000 range he does not buy unless he believes he can sell for at least $100,000 more than his purchase price, including realtor fees and repair costs.
As soon as he acquires a property, Leipzig promptly goes to work to get the property sold as quickly as possible.
"I visit the other houses on the market in the area I just bought a house. I want to see what my competition has or does not have compared to the property I just bought," he said. "I make sure the property inside and out is totally 100 percent perfect with no flaws whatsoever. It must be perceived to be the best property in the area. Then I put the price below market value and current appraisal."
Beating out the competition also means that investors may be willing to pay a higher commission to agents or provide other concessions to help the property stand out to potential buyers.
"I talk with my mortgage person and have him do a 3-2-1 buy down or a 2-1 buy down on the mortgage points, so my house will stand out from any other," Leipzig said. "Remember, in this market, pigs get fat, and hogs get slaughtered. You do not want to be a hog."