Los Angeles Foreclosure market heating up! Just listed 3 more Los Angeles Foreclosures in the last 3 weeks and I have at least 2 offers on all of them, and most of those offers are all cash. These are low end properties. Units and homes. They need work and are in the LA City REAP program. Basically when a tenant or tenants complain about living conditions to the city, the city comes out and does an inspection. Then, if there are violations on the property the city gives the owner a list of repairs or alterations the owner must complete within a designated amount of time. The owner is supposed to have these issues remedied and call the inspector to come back and sign off. If the owner does not make necessary repairs, the tenants then pay their rent to City REAP escrow account. The rent is usually reduced by 40-50%! This may explain why a lot of income producing units went into foreclosure as the city violation list can be extensive and therefore prohibitive for an owner to meet the demands. Especially if the values of the properties dropped considerably and no refinance or equity line was available for the owner to tap into ...At the very least this situation contributed to the owner going into foreclosure. When a property is in REAP it is very difficult to get a loan. That is why bargain hunting investors are coming in with all cash offers WAY below asking and getting great deals. You have to remember that these prices have already been reduced 50% from the last sales price in many instances.
That being said, these reap properties are not the only great deals out there. Homes and Condos in greater Los Angeles and the San Fernando valley, Simi Valley, Thousand Oaks, and Ventura have also come way down in price and are attractive as rental investments. In many cases 20% down can be at least a break even or positive small cash flow... In 10 years you have had somebody else pay down some of the principal on your note and you can cash in on the inevitable appreciation of the properties and also have some nice tax advantages.,