Some analysts say that we should expect upward of over 8 million foreclosures this year in the United States.  I myself am gearing up to purchase multi family properties and I also will also be selling quite a bit to interested investors. 

The fact of the matter is that everyone is now realizing that there is a direct and obvious correlation between foreclosures and the multi-family market.  Due to the staggering number of foreclosures, this in fact bodes well for multi-family:

• Millions of former homeowners are becoming tenants.
• Rental rates have stabilized in declining markets.
• Due to a larger ratio of homeowner/tenant use, rental rates have in fact increased in certain markets.
• Vacancy rates have significantly dropped.

Basically, the multi-family real estate market is improving and benefitting from the downturn of the general market.  It is expected that real estate investors of multi-family will reap huge gains.  Taking advantage of low acquisition prices and having higher rental performance is something that is positive in the Fort Myers real estate market at the moment.  Ft. Myers provides a great opportunity in a recovering marketplace.

About a mile away from our office there is a 210 unit apartment complex.  The average occupancy rate over the last 5 years I was told was 80%.  Today, they have a 97% occupancy rate which qualifies for “full occupancy.”

If you are a real estate investor and are looking for multi-family investment, such as apartment complex, now is the time.  We can assist in finding complexes with very reasonable terms, prices, and great capitalization rates.

In order to fascilitate transactions coming into our office, we mention to everyone looking for REO purchase opportunity that if you can have some patience with us, we will undoubtedly get you a deal that is right for you.  This is not due to an overwhelming amount of buyers, nor is it a lack of staff in my office. To get a good REO, we negotiate hard with the banks.  This takes time, sometimes weeks so it would be appreciated that once you imply interest that you are as patient with us as we are with the banks.

Currently, we are able to buy homes at over 80% discounts from the original note in Florida distressed real estate and REO’s.  Keep in mind that 80% doesn’t really mean all that much because 20% of that is not a true 80% discount off of TODAY’s current values.  Today we are able to achieve an average of 15% below market value on commercial property, single family income, and duplex to multi-family apartment complexes.  Whatever you are looking for in southwest Florida REO and foreclosures, we will have for you

Below are some homes we recently purchased.  We have many more properties like the ones below so please specify which you are interested in and we can begin the process with you.  Two ways we sell are wholesale and direct.  If it is a wholesale transaction, we will buy the homes from the bank in bulk to achieve the best discount.  It would essentially be a “flip” to you.  Our markup is very low, so most of the equity is yours.  We rely on sheer volume and look to make the investment right for you.

Southwest Florida Duplex REO: After minor repairs, $80,000. Paid $70k + $10k in cosmetics and flooring. Others available for $80k +/-. Rents for $650 Per side and provides a 13% Cap Rate

Single Family with Bay views: Fantastic water views and huge roof deck. Paid $180k in REO status and needs $60k rehab and updating. Current market value $335,000. Upscale neighborhood.

REO Single Family Home in Cape Coral, Florida Paid $80k. Current market value: $105,000. No repair or updating needed. Rented for $900

Gulf of Mexico Access. Paid $275,000. Current value $325,000 and discounted 65% from original note. By boat, 45 minutes to open Gulf and Sanibel Island. Slow zone takes up 40 of the 45 minutes. Slow zones are enforced for Manatee and Dolphin protection. Beautiful boat ride. Home has pool and boat lift/dock.

I have looked into several portfolios with our lenders and have considered SW Florida to have the better deals right now when it comes to overall cash flow performance and market conditions.  I just bought personally and sold a few duplexes (2 family homes) in Lee County (Ft. Myers area).  I focused on 2004 or newer builds, brought them back to brand new condition and rented them out.  Overall, I was into each duplex at about $75,000.  If you saw the duplexes you would think they were a steal.  All concrete construction, 3 bed 2 bath with 1 car garage on each side totalling over 2800 square feet.  I rented each side for $700 a month and making $890 per month positive cash flow AFTER paying my tax/insurance escrows.

Assuming my cash flow is about $10,000 a year on a duplex, I will have $40,000 in cash flow annually if I achieve my goal to purchase 4 this year.  The IRS will plan to take over 40% of that.  Here’s how you offset:  Consider you will have to pay $20,000 in federal/state income taxes.  Taking into consideration a small/medium sized Florida portfolio of property that you own, consider buying something in Louisianna along the coast, in what is called the “Go Zone” region. 

Remember Hurricane Katrina?  Well congressional / IRS incentives are still in place for real estate investors who invest in rental property can take a MASSIVE income tax incentive in exchange for helping to restore the housing stock.  The Go Zone allows you to accelerate the depreciation on your rental property in designated areas.  After ony the first year of ownership, you are allowed to take a BONUS depreciation of 50% in addition to normal rates of depreciation.  This “depreciation” is a tax deduction and the bonus 50% gives you a MASSIVE income tax deduction.

Assuming you purchase a home in Louisianna for $130,000:  The IRS will only allow you to depreciate the value of the “structure”.  Lets say the land is 10% of your price so your structure value now stands at $117,000.  After your first year of ownership, you will be allowed to take a tax deduction or “bonus depreciation” in the amount of $58,500 which is half of $117,000.  Here is the best part.  In the meantime, this Louisianna property is already rented out giving you cash flow as well. 

So let’s take your $58,500 bonus depreciation.  Assuming you are in the 35% tax bracket, the $58,500 essentially saves you $21,060 IN YOUR POCKET.  (I achieved $21,060 by multiplying $58,500 by 36% tax bracket). 

Let’s go back to your Florida properties.  Remember how I mentioned that assuming you have 4 properties and $40,000 of rental income annually?  Remember how I said that the IRS will likely command about 40% of that?  If so, the IRS will require you to pay about $16,000.  HOWEVER, being that you are invested as well in Louisianna or The Go Zone, your CPA will be able to amend your taxes for the IRS and completely eliminate you from tax liability from your positive cash flow.