The First One!

The First One! Today I purchased my first investment property! After months of research and meetings with investors and real estate “experts” I have finally purchased my first property to rehab and sell. Here’s the story: Let’s start with some background information….. The Hamilton County’s Sheriff’s office holds sheriff sales each Thursday at the courthouse. At these sales they auction foreclosed homes and tax certificates. Over the last 6 months I have attended nearly a dozen of these auctions without the intent to bid… I was there simply to see how it’s done and get the feel for the auction process. The auction takes place in the corner of the 2nd floor of the courthouse – approx 20 feet wide, 40 feet long, 25 foot ceilings with old marble posts and big crown molding. At the pre-determined auction time, the sheriff’s execution officer addresses those in attendance (usually between 20 to 50 people depending on the number of properties being auctioned), explains the rules, and then the bidding gets started. Each week there are between 30 to 70 properties that are auctioned off. The county appraises the properties and the minimum bids are set at two thirds of the appraised value (ex: appraisal = $100K, min bid = $67K). The execution officer announces the property and opens up bidding. 75% of the time the plaintiff (the bank that is foreclosing) is the only person that bids. They bid the minimum amount, silence from the crowd, then the property is theirs (these turn into REO properties that will likely hit the MLS at a future date). The other 25% of the properties are more exciting. The bank typically starts the bidding, then investors jump in. The bidding will go back and forth until there are 2 or 3 people bidding against each other. There have been times where they go back and forth in $100 increments for over 5 minutes (which is a long time going back and forth $98,100… $98,200…. $98,300… and so on). Finally, all but one drop out and the winning bidder has his or her property. That’s the process, now let’s talk about my personal experience…… A couple weeks ago I identified a property going up for auction that I thought had potential. Over the last couple weeks I visited the property multiple times (never having the opportunity to see the inside since it’s vacant and technically still owned by someone else… this is a big risk associated with the auction process… you typically cannot see the inside before bidding). During one of my visits I noticed a neighbor outside. I went over, introduced myself, and he proceeded to give me the scoop on the property as well as a little tour of the outside… very helpful. Using all of the information I had gathered to this point I put together minimum and maximum renovation estimates. Here are some additional property details: the property is on Deeridge, off Boomer, about 0.5 miles from St. Ignatius grade school. It’s a dead end street with some great houses. Comps on the street and in the near area are between $180K and $230K. The property was appraised at $132K, which put the minimum bid at $88K. After determining that this property fits my criteria, I ordered a title exam and pitched the property to my investors. I pitched the property with a maximum bid of $115,000 (remember this for later). This morning I got the “go-ahead” from my investors…. it was on!! I showed up to the courthouse a few minutes early to find a packed house… 50+ people showed up for the auction today. Somewhat intimidating. I tried to imagine how many of these people were interested in the Deeridge house… I didn’t have to wait long to find out… The Deeridge property was the 4th property to be auctioned. The execution officer announced the property and opened up the bidding……

• Plaintiff: “$88K”
• Investor #1: “Plus One” (for investors, this is code for “add $100 to the last bid”)
• Plaintiff: “$95K”
• Investor #1: “Plus One”
• Plaintiff: “$100K”
• Investor #1: “Plus One”
• Plaintiff: “$105K”
  • Investor #1 drops out
• New Investor #2 steps in: “Plus One”
  • Plaintiff drops out, I step in
• Me: “Plus One” (we’re now at $105,200)
• Investor #2: “Plus One”
• Me: “Plus One”
• Investor #2: “Plus One”
  • We go back and forth until we get up to $110K
• Investor #2 starts upping the bid by $400+, we’re at $110,500
• Me: “Plus One”
• Investor #2: $111,000
• Me: “Plus One”
• Investor #2: $111,500
• Me: “Plus One”
• Investor #2: $112,500
• Me: “Plus One”
• Investor #2: $113,000
  • At this point, the other investor is taking a few seconds to consider each bid. Conversely, I immediately say Plus One each time he ups his bid.
• Me: “Plus One”
• Investor #2: $114,000
• Me: “Plus One”
• Investor #2: $114,500
  • Here is where I think I am going to lose out… we’re dangerously close to my maximum bid of $115K.
• Me: “Plus One” ($114,600)
• Investor #2: “Plus One” … he slows down, only increasing by $100
• Me: “Plus One” ($114,800)
• Investor #2: “Plus One” ($114,900)
• Me: “Plus One” ($115,000)……. Damn…. One more “Plus one” from him and I’m done
• Investor #2: ………silence………. He dropped out!!!
• Going once, going twice, sold!!! For $115k – my pre-determined max bid. It was meant to be!!

I’m fairly confident that the other investor thought I would continue bidding way past $115K. Because I immediately said “Plus One” after each of his bids he had no way of sensing I was getting close to my maximum bid or that I was actually at my max bid. It took everything out of me to hold in the huge smile hiding behind my face when he dropped out at $115K. Well, now the smile is showing through! Where to go from here? Within the next 30 days, the sale will be confirmed and I will be the legal owner of the property (hopefully that day comes sooner rather than later). At that point, I’ll be able to evaluate the inside of the property and develop our renovation plan! A picture of the house is below. Once I get the keys I’ll post pictures and videos of the inside along with my renovation plans. My journey has just begun! Stay tuned for more pictures and updates on the rehab! Anthony
4/7/16