Is it wise?

Question

I am starting out bidding at the county steps but can't seem to win one. Everyone tells me to not bid above 70% of market value. Is the correct? or do i bump it up to 75/80 %?

Thanks, Matt

Seth Williams · Answer

Maher Bateh - I'd say HANDS DOWN, direct mail. But not just any direct mail campaign - you have to be reaching out to the right people.

There are many different ways to organize a direct mail campaign (mailing to out-of-state owners, narrowing down to certain price ranges and neighborhoods, probate lists, etc.). Personally, I've found that mailing to delinquent property tax owners brings in some pretty spectacular results, and the property owners tend to be VERY motivated to sell (you can send them some pretty ridiculous offers and they will seriously consider taking it).

Getting properties for 10% - 30% of market value is *absolutely* in the realm of possibility, and you can virtually eliminate your competition. I never have to fight with other investors to get the best deals, and this has made this approach my favorite BY FAR.

Tim Czarkowski · Answer

Auctions here is a tough way to get started. I spend countless hours going through the list of properties, comping the ones that might actually sell, driving all those properties, and then preparing our bids. I think to do it properly you need to be doing it full time. Just on auctions alone I spend at least 20 hours a week preparing our bids and this year I have only been averaging a property a month. There are several hedge funds buying here so anything that fits their criteria is an instapass for me. They pay 100% to 105% of ARV AT THE COUNTY AUCTION, lol.

I am actually considering starting a direct mail campaign. I think that may be an easier way for someone just starting out than the foreclosure auctions. The county auctions are very competitive, you can't get in the properties, the title is not guaranteed, and you have to pay all cash the same day as winning bid. None of that is likely involved in a straight off market purchase from a desperate seller.

Anyways I think you should have a few different ways of finding properties and there are plenty to choose from.

I work full time as an investor here in Jacksonville and also work with a few investors as a real estate agent. If you ever have any questions or just want to talk about real estate feel free to give me a call. I love talking real estate.

Maher Bateh · Answer

Seth - Starting out, what would be your advice if not auctions, REOs? Those type of homes seem to go way over what im willing to pay in the Jacksonville FL market.

Brian P. · Answer

It all depends on many factors. Chances are your not aware of the true condition of the property, and are the current occupiers the type to hunker down and mentally off key. Your true purchase price and your holding costs are a educated guess.

One key is to already have a buyer in place. I pay to see the inside before I bid if I have to. I also sign a contract with the owners if they are still there and in the picture for a money for keys deal if I am the winning bidder.

I know I told this story before but I had a good friend I went to auctions with and we had a agreement to take turns if we wanted to bid on the same property. We looked at one property together and it seemed like a dream deal and it was my turn but he thought his wife would love it and intended to make it his new home. So I took a rain check. He got the bid and we went to the house to meet the locksmith. It was beautiful on the outside, manicured yard, everything perfect and he said he intended to move in by the first.

Locksmith opens the door and the entire inside had been removed, just the barest shell of the outside existed, a strong wind would have probably knocked it over. I was one happy guy I had given that rain-check. And of course he had bid over his normal amount to get it.

Seth Williams · Answer

Personally - I would never have the patience to acquire properties this way. Auctions generally involve WAY too much competition to get a deal that is actually profitable enough to justify my involvement.

I'm sure there are deals can be had, but I've never found this to be the best way to find them.

Dawn Anastasi · Answer

Sometimes at auctions people will bid up because they want to WIN, but if you wind up overpaying you just LOSE.  Let someone else overpay. Stick to your guns.

Eric Thomson · Answer

The rule of thumb is 75% ARV minus repairs. If ARV is $100,000 after $15,000 in repairs you would offer $75,000 - $15,000 = $60,000. Obviously the lower the better. You're going to have many investors or buyers at auctions that are willing to bid retail prices on many properties. I'd stick to your formula and not get too anxious because you'll probably regret it.

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