How about a $31,000 House?

Living for 35 years in Los Angeles, my sense of pricing for real estate got permanently warped. I lived in a million-dollar house in the foothills while my mom lived in a larger, nicer $100K house in Lubbock, Texas. During the 2008 crash my LA house lost a quarter million in value for 5 years, while Mom’s dropped $20K for a year and bounced right back. What if you could pay $31K for a house in America that’s worth double the price? Amazingly, investment in these low-cost properties have outperformed most other investments while providing better security against a real estate crash.

American Real Estate Prices

Leaving a South Carolina airport with a client, she pointed out that due to lack of zoning restrictions, there was a $31K house next to that beautiful $100K house. I replied “That would never happen in Los Angeles. Zoning regulations would prohibit it. Plus, unicorns are more common in LA than $31K and $100K houses!” The fact is that in many places around the US, there are nice homes at prices which are unbelievable to most of us, esp. Californians and New Yorkers, where home prices typically start at $400K.

Home in Columbus, GA
2 beds, 1 baths, 1,053 sq. ft.
Price to Investors
$21,702
Market Value $40,283

During the height of the Great Depression in the USA from 1931 to 1935 over 1% of homes were foreclosed. During the worst part in 1933 over 1,000 per day were taken by the banks.

According to statisticbrain.com, from 2007 through 2014 over 17,206,000 US homes were foreclosed and 5,875,000 were repossessed. Other sources say, “over 7 million foreclosures were completed.” Estimates vary, but for several years, at least 3.4% of all mortgaged homes were in “foreclosure inventory” and over 9,000 per day were taken by banks.

What happens to those homes that
the banks take?

The bank has to manage its asset and try to sell it for the best deal they can get. In this process banks can be incredibly picky and turn down good buyers for peculiar reasons known only to constipated accountants and government regulators.

I tried to purchase an REO (Real Estate Owned by the Bank) and had been pre-approval by my lender. The bank attempting to sell the REO (for top dollar, I might add) insisted that I had to qualify for a loan from them in addition, even though they would not be financing a dime. If you’ve gotten a real estate loan lately, you know that satisfying a real estate lender can easily take 50 to 100 hours of work. I walked away.

If they can’t get a normal buyer, the bank may try to auction their REO. If this isn’t successful (e.g. their reserve is not met), it stays on their books.

Invest in Some 31,000 Houses Today!

Here’s the kicker. Bank are required to have capital reserve set -asides of 125% of the REO property value.

Since they make their money by loaning their capital, this eats into their profits. Not to mention that with fractional reserve lending, they could lend out the money the REO is tying up 6 times or more. This also lowers executive bonuses and can raise concerns by regulators. Sooner or later they have to sell their REOs.

This is where Equity & Help (www. equityandhelp.com) comes in.

In the last month they’ve acquired 56 houses. They sell these for an average of $31K, but their market price averages $62K. Some are fantastic bargains.

Home in Altoona, PA
4 beds, 2 baths, 1,590 sq. ft.
Price to Investors
$23,444
Market Value $58,997

If you want, you can pick up their “high-priced” $ 53K houses which have an average market value around $100K.

Let Me Hear from You!

This is just the tip of the iceberg of what equityandhelp.com offers. They are looking for “finders” as well as investors. If you’d like to discuss potential opportunities they have available, give me a call at 727-304-5000 or send an email to CEO@CreativeStrats.com.