Sunday, July 15, 2007


REO stands for "real estate owned", a term that actually means "real estate (bank) owned". And bank-owned real estate is where investors are finding a lot of tremendous deals these days in the greater Denver area.

Over 20% of all active inventory in the Denver MLS system right now consists of REOs (bank owned), short sales (seller owes more than the property is worth) or foreclosures (seller can't or won't make payments). This high number of "distressed" listings is one reason why our market has seen little or no appreciation over the past few years, but it also has created a real opportunity for investors to pick up bargains as homes are sold at discounted prices.

To illustrate the opportunity that exists, I recently assisted an investor in purchasing a five-year old bank-owned townhome measuring over 1,600 square feet for about $135,000. With a downpayment of 20% and about $2,500 invested to paint, clean carpets and update fixtures, the property is now yielding positive cash flow of over $100 per month. And with recent comps in the same complex going for the mid $150s, we picked up some equity going in to compliment that monthly cashflow return, which can be used to pay down the mortgage and strengthen my investor's equity position in the property.

I have assembled a FLYER with some bank-owned listings currently on the market. For those of you who are out of the area, this will give you a feel for what our market looks like. Yes, there are homes on the market for under $100,000. But there is more to price when choosing a profitable rental property. Condition and location are huge factors in the long-term viability of your investment property, and so we'll look closely at these factors as we look at what's available.