Blog, Income Property

Southwest Florida REO Duplexes

Where can you find a property today for $75,000 that has an annual Net Operating Income (NOI) of  over $9,000 a 12% annual return on what you actually PAID?  Where can you find a cash on cash return annually of over 12% backed by real estate?

As mentioned earlier, our REO division has structured a powerful cash flow opportunity that it has been a topic of discussion in our Hoboken office.  Utilizing our asset management, bank, and REO brokers, we have come up with a turn key program that mitigates even a “worse case scenario” risk.

We are approved to buy duplexes in Lee County, Florida for a discount of over 80% from the original note.  During the peak, duplexes were built by homeowners and speculators for a land/construction cost  of $280,000 to $310,000.

Our $75,000 Turn Key price is structured around a few events.  First, we acquire the property through our LLC to achieve possible further bulk discounts.  Included in the $75,000 is the purchase for the entire duplex “As-Is.”  Due to the benefit of all duplexes being built in 2004 or more recent, there are no structure repair costs involved.  All duplexes comply with the most recent code enforcement and are built by CBS Construction which stands for “Concrete Block & Steel”, the strongest of all building material.  Included in our price is a $2,000 allowance for any cosmetic repairs that may be appropriate.  Our partner General Contractor will handle cosmetics.

Also included in the price of $75,000 is a $2,000 allowance for back taxes that must be paid by buyer.  The recent amount of back taxes have been $1,000 to $3,000, so we use the number in the middle.

Once you contract for the duplex, it is likely a 30 day closing.  In the meantime, we can finalize cosmetic appeals and also contact property management who will put the duplex in his “available rental unit” program.  In most cases it takes only 3 weeks to occupy the duplex once advertising begins and the rental rates are a solid $650 per side monthly.

Annual real Estate taxes run approximately $2,300 per year and Average insurance premiums run $750 per year, covering wind, flood, fire, and all that you need.  Although these duplexes are located only minutes to Ft. Myers Beach, Sanibel Island, Naples, etc, we are focusing on the western side of the county which is not located in any flood zones.  Property Mangement charges 8% monthly and lawn maintenance will run about $50 per month.

Let’s add your operating expenses as stated above.  Your annual operating expenses are $4,898.  Let’s assume a 1 month vacancy per year so add $1,300 to that which gives you a total of $6,198 in Grand Total Operating Expenses.  Renting your duplex at the market rate of $1,300 will give you annual income of $15,600.  If you subtract your conservative operating expenses, your Net Operating Income is $9,402.

Whether you are looking to finance or pay cash, the cash flow figures are very powerful.  Lee County has been the poster child for foreclosures recently, but the last 4 months have helped stagnate prices.  In November 2008, 980 homes were sold.  In December, over 1000 homes were sold.  In January, over 1000 homes were sold.  And in February, 900 homes sold.  This is an average increase of 400% in real estate sold since the previous year.  Although it may take a couple of years for FL to take major appreciation levels, the prices today and the cash flow generated mitigate nearly every other possible risk involved.

Contact our principal Scott, in Ft. Myers, FL at (239) 872-5107 for further details.  Duplex pictured in this post is the same or similar to the ones’ that we purchase.  Call us for additional information about the SW Florida market and all of your Florida and New Jersey Real Estate needs.  CLICK HERE to review a financial pro forma.  CLICK HERE for some interesting FL real estate statistics.

Another benefit of purchasing REO property in FL is the “flip” opportunity which have been yielding about 12% in a 4 month span.  Due to many investors taking over the lower price homes with cash purchases, mortgagee homeowners are forced to pay a higher price to win a bid.  Most homeowners are utilizing the great opportunity in USDA Financing.

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