For those of you who get into rehabs, how often do you buy properties at foreclosure auctions? I dont see alot of people here that purchase from auctions. In general, do you find most of the good deals go the route of short sales before the aucion? For those who attend auctions, what is your opinion on the availiable properties? How often are there homes with enough equity built up to make them worth while?
I purchased 24 homes at auctions in the past 12 years. Never purchase a property at an online auction because when you win the bid the bank often rejects your bid and you may never get the title. In that case, the auction you purchased the property at normally does not return the 5% auction fee. Live auctions tend to always give you a clear title and I never has one problem. Read on the internet the bad things about online auctions.
As for live auctions, I live in the Los Angeles area and the Los Angeles County has an auction Monday through Thursday every week. Auction.com has about two live auctions every month in Norwalk California.
I learned how to look for properties every day without wasting a lot of time. SInce a very high percent of foreclosures get cancelled on auction day I don't waste time driving to look at properties until the day before the auction. I purchase only properties within 15 miles of where I live and I know the neighborhoods so well I don't even look at most homes I buy.
I developed my own software to analyze properties. My goal is to flip a home and make a minimum of $50,000 in 6 months. My spreadsheet includes calculations for every expense including $5,000 to $9,000 to evict the current resident. I include the 5% cost I pay the auction, 55% real estate commission to sell the property, closing costs, $25 to $35 per sq foot for rehab, utilities, insurance, property tax and I even deduct the 25% I pay for income tax. I pretty much always make $50,000 and when I don't have to evict a tenant, or rehab costs are less than my budget I will make around $80k.
I look at going to an auction like going to a park for a picnic. I don't have anxiety, relax and think of going to the auction as a rest period. I will read a book or just chill and when I every property I was interested is cancelled I don't consider the auctions to be a failure because auctions are only one more arm extending out that generates income.
One more very good way to get properties is to be friendly with everyone in your bank and let them know you are an investor and you are willing to pay a great referral fee. I spoke with my banker when opening an account and two weeks ago he turned me on to a person who was getting foreclosed on for a 6-unit building in San Pedro California. I paid off his loan, picked up the property for $720,000 and it is worth no less than $250k per unit = $1.5 million, or maybe even $300k per unit $1.8 million.
This is the 2nd time I purchase an apartment building just by letting people know I am looking for apartment buildings. In 2003, I purchased a 14-unit property for $825k and could have sold it the next day for $1.4 million. That was when properties were going for $100k per door.
But, my point is; to make the really big money in real estate you have to hold onto your money and wait patiently like an alligator for the big fish. You need to know the power of the numbers for multi-unit properties. Don't be stupid like the idiots in California paying $350k per door.
Do to every auction you can attend and don't get disappointed because you have to go 20 or 30 times to get one property. Just like gambling in a casino, you may lose several times and on one lucky day you win 5 or 10 times and walk away a big winner. You may not get an auction property for a year and the next year you get 6 properties and make $300k to $500k.
Be careful about listening to opinions about auctions. Good investors don't want to cook their Golden Goose!
Here is my bonus for those who don't know.
This is the very best website to find auction properties because this list contains the exact date the property is scheduled to be auctioned and I think this list is updated on-the-fly when the status changes.
The best website for everyone wanting to but foreclosures is propertyradar.com. You have to (must) watch the videos on this website to understand how powerful this website is.
Auction.com also has a terrific list of foreclosures and their listings are very accurate.
I think your market dictates some of these factors, but for my local market I see the same thing. In the last year, I have attended every foreclosure sale and have only bought one property there. I personally don't have much experience with short sales, but I know a couple investors that do fairly well with them.
Either way I would recommend consistently and diligently developing multiple avenues for finding houses. Notice that though I have put hours upon hours into researching foreclosure sales and have only bought one deal there, I still go every month. There is no "golden" method to finding deals, but there are dozens upon dozens of silver methods. If you will consistently and diligently do a dozen or two of the silver methods, you will find more houses than you can rehab.
Ryan, Where do you find most of your properties? Also, do you ever use a real estate agent? I have checked out your website. I know I could probably piece this togehter by looking back through your posts but since the form is fairly spread out I apologize for asking this if it has already been asked.
I don't find most of my properties through any ONE method.
There are NO golden ways to find deals.
There are tons and tons of ways to find a deal or two per year and maybe three or four if catch a good one. You have to consistently and persistently do enough of these "little" ways to add up to a lot of deals. I would recommend figuring out 3 or 4 methods that you like and do them consistently and persistently. Then after a couple weeks or months add 3 or 4 more on top of the 3 or 4 you have been doing. Then after a couple more weeks or months add 3 or 4 more on top of those. Do this until you are consistently and persistently doing 15 or 20 different methods. You will find that out of each method you will get a deal or two every year. If a method doesn't give any fruit after 6 months to a year of doing it consistently and persistently then phase it out and phase something else in. The mistake many investors make is that they try a method once or twice and don't get anything, so they stop doing it.
Success only comes to a lucky few from winning the lottery. For the rest of us, success comes from consistently and persistently working towards our goals in a step by step process.
Atlanta, in reference to using an agent, yes I do. REO's, HUD's, and motivated sellers via the MLS (which all entail using an agent) are a couple of the methods that I consistently and persistently do.
Ryan, good response and I concur completely although to date I have only developed about three different methods so sounds like I need to keep thinking : :type:
In regards to the agent, do you typically use one when selling or does it just depend?
It does depend. I have developed a relationship with a local realtor that I use to list my properties (at a discount of course) after about 30 days of me trying to sell them. The agent has an exclusive AGENCY listing, which means if I sell them then she does NOT make a commission. This is not a common or preferred strategy for realtors for obvious reasons, but it was a requirement of mine to have 5-10 properties with her at a time.
I would also just about always recommend using a realtor on a rehab situation. The buyers you are looking for with a rehabbed house use realtors.
I would also just about always recommend using a realtor on a rehab situation. The buyers you are looking for with a rehabbed house use realtors.
Do you mean use a realtor to buy or sell or both? it sound like you mean when you sell.
Sorry, to sell a rehab, I would recommend a realtor.
The last three houses I sold that were rehabbed didn't have enough margin in them to pay 6% to a realtor. You can send them "broker protected" language all day long for 3% and because they split with their broker they are not going to bite....unless things get much worse.....which might happen. MLS is glutted right now with product which is what you get when you list.
If you're holding an open house and a realtor's client is in their car and says "Can we see that one" they might make a call and see if the FSBO is paying 3%. I make it my personal bottom line to make more than a realtor on my houses. Most of the time that let's them out.
If you've got product and you can hold open houses/make flyers/be customer oriented...and it's spring/summer market...you don't need a realtor..... really. Who knows the most about the product? You or a realtor?
One called me the other day and asked to walk through my current project. New kitchen cabinets/wonderful tile/labradorite big blue granite countertops. What did she say "I like the color of the walls" and ...."How much do you want for it?' GOT NO CLIENTS.. waste of my time.
Buyers want information.
Go with their closing company or find my own?
I recently won a home on a foreclosure auction and they have two options. Use the bank’s closing company or use my own. What is the difference? This is my first flip.
I purchased 24 homes at auctions in the past 12 years. Never purchase a property at an online auction because when you win the bid the bank often rejects your bid and you may never get the title. In that case, the auction you purchased the property at normally does not return the 5% auction fee. Live auctions tend to always give you a clear title and I never has one problem. Read on the internet the bad things about online auctions.
As for live auctions, I live in the Los Angeles area and the Los Angeles County has an auction Monday through Thursday every week. Auction.com has about two live auctions every month in Norwalk California.
I learned how to look for properties every day without wasting a lot of time. SInce a very high percent of foreclosures get cancelled on auction day I don't waste time driving to look at properties until the day before the auction. I purchase only properties within 15 miles of where I live and I know the neighborhoods so well I don't even look at most homes I buy.
I developed my own software to analyze properties. My goal is to flip a home and make a minimum of $50,000 in 6 months. My spreadsheet includes calculations for every expense including $5,000 to $9,000 to evict the current resident. I include the 5% cost I pay the auction, 55% real estate commission to sell the property, closing costs, $25 to $35 per sq foot for rehab, utilities, insurance, property tax and I even deduct the 25% I pay for income tax. I pretty much always make $50,000 and when I don't have to evict a tenant, or rehab costs are less than my budget I will make around $80k.
I look at going to an auction like going to a park for a picnic. I don't have anxiety, relax and think of going to the auction as a rest period. I will read a book or just chill and when I every property I was interested is cancelled I don't consider the auctions to be a failure because auctions are only one more arm extending out that generates income.
One more very good way to get properties is to be friendly with everyone in your bank and let them know you are an investor and you are willing to pay a great referral fee. I spoke with my banker when opening an account and two weeks ago he turned me on to a person who was getting foreclosed on for a 6-unit building in San Pedro California. I paid off his loan, picked up the property for $720,000 and it is worth no less than $250k per unit = $1.5 million, or maybe even $300k per unit $1.8 million.
This is the 2nd time I purchase an apartment building just by letting people know I am looking for apartment buildings. In 2003, I purchased a 14-unit property for $825k and could have sold it the next day for $1.4 million. That was when properties were going for $100k per door.
But, my point is; to make the really big money in real estate you have to hold onto your money and wait patiently like an alligator for the big fish. You need to know the power of the numbers for multi-unit properties. Don't be stupid like the idiots in California paying $350k per door.
Do to every auction you can attend and don't get disappointed because you have to go 20 or 30 times to get one property. Just like gambling in a casino, you may lose several times and on one lucky day you win 5 or 10 times and walk away a big winner. You may not get an auction property for a year and the next year you get 6 properties and make $300k to $500k.
Be careful about listening to opinions about auctions. Good investors don't want to cook their Golden Goose!
Here is my bonus for those who don't know.
This is the very best website to find auction properties because this list contains the exact date the property is scheduled to be auctioned and I think this list is updated on-the-fly when the status changes.
The best website for everyone wanting to but foreclosures is propertyradar.com. You have to (must) watch the videos on this website to understand how powerful this website is.
Auction.com also has a terrific list of foreclosures and their listings are very accurate.