BiggerPockets

I think it would be cool for everyone who's actively
investing to talk about what their doing in this market and
what's wording today...

I'll start...

I've found the pre-foreclosure market to be a waste of
time. Every short-sale I've attempted in the past couple
years has gone to the wayside thanks to the lenders not
wanting to deal...

So, I'm curious if anyone is actually making money with
pre-foreclosures, auction sales, or REO's. Just like every
other "make-money" market, there seems to be a lot of hype
built around foreclosures, but I really haven't seen many
examples of people making a killing with them right now
(unless one has millions of liquid capital).

I've done a couple of wholesale deals this year, but it
seems like the people with equity in a house are few and
far between. Anyone have a different or similar
perspective on that?

For me, the most money this year has been in creating
extremely creative stuff with sellers, but the market has
become flooded with seller financing deals and it's getting
harder to find good buyers for even a "below market value
seller financing" offer...

I'd love to hear your opinions...

Originally posted by Charles Perkins

I'm buying properties to hold long term. Currently looking primarily at distressed multi-family residential properties.

Sounds like a good strategy for this market... about how many units will you go for? Any reason why you like multi-family over SFR?

Chris, real estate is like anny other business. In order to succeed, you need one of more of the following:

1. Expertise / smarts
2. Willingness to work extremely hard
3. Lots of capital
4. Luck

I think any one of the above is good enough to make money in RE. If you have two or more, even better.

I come under category 3 and am making a reasonable return on my investment buying foreclosures. But if I had a lot less capital, I may be doing something else.

Chris,
I think your observations are right in line with mine here in Indiana.

I was just having this conversation Saturday with a new couple out our local REI meeting.
One quick example: I put an offer in on a short sale SFH that was for sale at 43.9K. I offered a market rate of 22K which was actually a generous offer but reasonable considering the condition of the home. The bank countered at 42.9K. I did not even bother to counter. The house sold 9 months later as an REO for 18K.

Here in Ft Wayne, the best deals are the REO's. With REO's so abundant and cheap, there is very little reason to spend time with other ventures like short sales. I see various investors buying REO's and then trying to wholesale them on craigslist. I am not sure why someone would pay the premium on craigslist when they can buy them cheaper as an REO.

We have predominately bought REO's, rehabbed them, and held for rentals.

We successfully completed one rehab and resell to an end user and are making an offer today on potential rehab #2. #1 went well but the key to rehabbing is buying the right house, at the right price, in the right location. There is definitely competition here for homes that can be purchased, rehabbed, and sold for a profit. We are offering 5K earnest, no contingencies, and a 5 day cash close to see if we can get the price we need. We'll see how the bank responds.

I have not done this yet but there is a market for people wanting to buy homes on land contract or with seller financing. One downside is that you tie up a lot of cash to do this since banks are not interested in providing loans for low end rentals.

Chris, what area of the country are you working?

Chris Luithly-Fort Wayne

In this market I've been using a two-part strategy.

-- Acquiring more buy-and-hold properties for my rental portfolio.

-- Continuing to purchase rehab flip properties.

The mixed approach seems to be a real happy medium for me. 90% of my deals are REOs and a handful are private sellers looking to liquidate. The rehabs are generating the extra cash to acquire the buy-and-holds.

In the past 30 days I've purchased a small six unit apartment building, two SFHs, and a rehab flip.

Like everyone else, I have not had any luck with short sales. But, to be fair, I haven't given them much of a chance since I grow too impatient waiting for the banks to approve offers. Since I'm not working with a ton of capital, I tend to go after properties which have a quicker response rate.

"How are you making $$$ today?"
I am spending far less time on teh computer here and more in the field, hence my absence from BP. I specialize in retail flipping REO properties I acquire most often before they ever hit the MLS. In my experience, REO purchases are by far the way to go here in SO CAL as short pays take too long, have smaller chances of success, and the time and energy (and expense) you must put into them is often wasted by the bank's unwillingness to play ball. This is for many reasons which include (but not limited to) PMI insurance - why take a loss with a short if they can collect insurance, lack of proper systems - letting short pays not get pushed through and end up taking far less via REO (God only knows why this occurrs), and sometimes taking a loss via REO is more beneficial to the lender (note holder) than approving a short pay.

My goal was to flip 25 properties this year and so far, I have done 12 with several more in the pipeline. I may fall short of my goal, but it was set in the clouds so I am happy with my results. In most cases, I make a net profit (before taxes) of $50k here in CA and my average acquisition prices are between $200k and $350k, with some slightly below and some above.

I have my own cash which is a huge advantage but I also use a ton of private funds which puts me over the top of my competition. I can lock up contracts for multiple homes at one time and show POF's to close.

This strategy is certainly not hype but real, the only question is, does the individual have what it takes to succeeed which was laid out above in another post (although I would not agree to have "luck" as one of the possible options - save that for Vegas) I make money with knowledge, experience, know-how, a great team, money (that of my own and others) and the willigness and ability to work my tail off.

Not sure about all states, but certainly here in CA you can make a killing if you know what you are doing.

Best wishes to all for a prosperous investment(s).

Will Barnard

Thats good advice Tim. Beat your competition in rental price but buying smarter!

Still considering a move to my backyard?

Right now it is just rental income. Demand is high as good, middle class folks who lost their homes to foreclosure still want to live in a middle class neighborhood. I have bought more properties this year, bring my rental total to 30 units. Personally, I don't like the cheap purchase/cheap rent market, my average rent on the five I bought this year is about $1,400 a month. My gross scheduled rent on the 30 units is $26,000 a month. My 10 units in the Fresno area average $700 a month, so I do own a few lower middle class rentals (which I hate due to tenant damage, higher vacancy rates and poor neighborhoods).

Having a full time job as a Finance Director doesn't give me the time to flip but I am "retiring" October 1, 2010 so I may explore doing that next year. I will be moving back to Orange County and will be working the Orange and Riverside County markets as I have a LOT of Realtor Contacts in that area.

Will
My five I bought this year are not in California, they are in Texas, Arizona and Oklahoma. Also, I paid all cash for them, so there is no PITI. Here are the numbers:
Property A: Rent $1,600
Property B: Rent $1,500
Property C: Rent $1,100
Property D: Rent $1,295
Property E: Rent $1,195
Currently, the average is $1,338 but 3 of the leases are up at the end of the year and the average will be about $1,400.

I paid exactly, and I do mean EXACTLY $700,000 for all five. My return is not any where near what others achieve here on BP, but all five of these houses are less than 5 years old, are in booming areas and are houses that I would personally live in and be happy. How does that MasterCard commercial go? Sleeping soundly while owning rental Real Estate - PRICELESS! Some things money (or returns) can't buy!!

Originally posted by nationwidepi

Thats good advice Tim. Beat your competition in rental price but buying smarter!

Still considering a move to my backyard?

Wow, this thread has become the resurrection thread.....lol.

Gotta be honest. After some serious thought I figured out I was thinking with my lower brain rather than my upper brain so I refocused. Since then I got a scholarship offer to law school so I'm going to knock that out over the next couple years then set up shop in Nevada. The plan is to focus on real estate and helping clients be invisible and hide money.