Are short sales all they're cracked up to be for real estate investors? Absolutely not -- as few as 10 percent of all attempts to buy them actually go to closing in some local markets, says Alexis McGee, California investor and founder and president of Foreclosures.com.

A far better use of your time and energy, she advises, is to avoid the often long and complicated process of buying a short sale from a distressed home owner and pursue properties owned by banks and other lenders that they've held for awhile ... and really, REALLY need to dispose of.

What are the hassles of short sales for investors? Among others, McGee told Realty Times in an interview this week:

• You rarely get the sort of steep price discounts serious investors need - in other words, at least 30 percent off current market value. Only when banks actually take back a piece of property as REO and try to sell it unsuccessfully for six to twelve months does the bank get significantly motivated to offer deep discounts.

• Short sales can take forever - and involve huge amounts of your time as an investor -- compared with REO sales. The documentation and negotiations involved may not be worth the relatively modest price discount you ultimately receive.

• Second lien holders can be major sources of pain for short sale investors -- even blocking the deal altogether simply because the first lien holder won't pay the second lien holder more than a few thousand dollars to go away.

There's hardly a shortage of REO opportunities on the market right now, especially in the hardest hit parts of California, Florida and several other states where foreclosures are at record highs. Rather than wasting time working with financially distressed home owners who have little or no equity looking for a white knight buyer, McGee says "let those (houses) go to the bank," rather than purchasing them for ten to twenty percent discounts to market value.

Investors need to get much higher discounts to make their acquisitions cash flow - forty percent or more ideally, according to McGee. Plus you're dealing with the bank alone rather than with multiple lien holders with separate claims.

Not that REO investing is a cake walk, however, says McGee. It's not. "You've got to have patience. You've got to know which banks have properties and you've got to get to know and work with their (real estate) agents. Then you've got to ask those agents: Which properties does the bank REALLY want off its books?"

That's where the deepest discounts -- and the fewest hassles -- generally can be found.