About to have 300k and thinking auctions. Thoughts?

Question

Hello all,

It looks like my next sale will net me somewhere around 280-300k, which is more money than I've ever had in cash in my life. Now I get the pleasant task of deciding how to reinvest and I'm considering foreclosure auctions at the courthouse steps. I'd like to get some advice as to how to prepare; my current plan is to show up the first time just to observe and ask people there for advice, but I'd like to at least research a few properties and do a dry run. Can anyone walk me through the steps they take? It's in Austin TX if that helps.

Thanks

Tom Mole · Answer

@Jacob Pereira, take care at the auctions. It looks easy, but there are sharks in the water! It's easy to get "caught up" in the action and forget that this is NOT a game.

• Full disclosure: I have never gone to a TX auction and I'm not particularly familiar with foreclosure law in your state.

Here in Los Angeles county they hold auctions every business day, often at multiple venues. I have gone to those auctions many times, not to bid, but rather to experience the process. I seem to learn something new each time. I'm so glad I never bid there without becoming a lot more seasoned.

Honestly, I've seen a lot equity created at the auctions, but I think there are better ways to create that equity. Auctions are easy, but very cash intensive. Unleveraged capital is not working hard enough for my tastes.

How to you feel about making offers on REO's on the day that went to auction? You may well find some banks that just want to be done with the property, but no one bid at the auction. Make them a considered offer. you likely won't have to pay cash and you'll have a reasonable escrow period to raise financing and do inspections. Now this way you could use your capital to leverage a LOT more acquisitions. More acquisitions, more profits. Just saying....

How does negotiating a short sell with the distressed homeowner before the auction strike you? You could use your ready capital to impress the lenders and capitulate a settlement. Once your offer is accepted you could get financing and again leverage your cash for greater profits.

And so it goes. Does any of this sound appealing? Do you have any questions? Feel free to contact me. If there's anything I can do to help, it will be my pleasure.

Happy holidays.

Richard Balsam · Answer

Jacob:

Most of the homes I have purchased in the past have come from the foreclosure auction,  near me in Atlanta. I don't know much about Texas law, but it should be somewhat similar. First- you have to decide where you want to concentrate, since all foreclosures are auctioned between set times, as defined by the state. At this point- it will be far easier if you can locate a third party company that lists all foreclosure homes for you. This will save you hours of dry work. Google multiple times until you find a company like this. We have one here in Atlanta that combines the house legal information with tax data, and I import it to my computer in .xls format. A major time saver! Message the data any way you want, and visit the homes that meet your criteria. I map multiple homes so I can see where they are located, and drive and see 25-30 homes per day. Take pictures, and research the mortgage date to make sure it's the 1st mortgage only. Also- see if any IRS or Texas liens ( or FIFA liens) are on the property. Again, here in Georgia, I have access to title and lien information from my desk - you may have it at the courthouse only). Not all homes will make it to the auction, and sometimes you will miss a certain house due to the large crowds and the Crier came and left without you knowing - it happens. Do not get caught up in a bidding frenzy. You will make more money in the long run the better educated in the home you are ( vs. your competition). The ones that overbid may not be back again! Know when to stop and watch the fireworks of stupidity happen with overbid homes. Many times, you will get a better deal offering 90% of MLS prices than what many people bid at the auction- just to win the house! It's crazy sometimes.

Dave Borrero · Answer

@Jacob Pereira

Hey Jacob, Im not sure about your current investing experience but you can always look just outside your major city limits for something that is only a small percentage of your capital that you can pick up for a deal and go trough that process even if you dont make your ideal ROI, (Dont lose money by any means), but that you can get trough and essentially buy yourself a hands on education. Then you can take the remainder of your capitol and go for the bigger deal in your desired area.

Best of Luck!

Mark Beno · Answer

@Richard Balsam - yes, you're correct. I meant Equity Depot. Listsource gives you an option to select a certain equity % for properties, ie., all properties with 30% or more equity. Probably just another way to arrive at the same list as Equity Depot.  I'm just now starting another DM campaign for Absentee Owners (ie., rentals). Thanks for your clarifications, and good luck with your investing!

Richard Balsam · Answer

@Mark Beno - I think you mean Equity Depot ( not property Depot)!! I haven't used Listsource before, but I can tell you Equity Depot not only includes the information from the foreclosure ad, but also merges this data with tax data on the house. This way, when I import it, I can do a quick calculation in Excel for the hundreds of properties and find immediately if there is any equity worth exploring further. For example, knowing that tax assessed value is BELOW the actual market value ( it better be!), I just subtract the first mortgage amount in one column from the tax assessed value in another column. If the amount is positive, I select which rows I want to explore further to research actual market values to determine estimated equity per house. Then my analysis first begins! But - this only takes me a  a few minutes to remove properties that do not interest me. There is much more to the data  - and i usually wind up with 5-6 spreadsheets to arrive at my final selection.  I hope this helps.

Mark Beno · Answer

@richard

@Richard Balsam How is Property Depot different from obtaining a list from Listsource, and selecting foreclosures or pre-foreclosures? Is the benefit from Prop Depot that it sends you updates, or you can obtain an updated listing any time you want?

Thanks!

Richard Balsam · Answer

@RushWall - Look up Equity Depot in Kennesaw. You can buy by the month, or 3-6-12 month subscriptions too. If you want to import the data, their pricing  per "area" jumps from $49 per month to $79.  A lot of investors stick with the lower cost by printing mailing labels only. I prefer the auctions, with the imported data even though many homes fall off the list. My method allows all liens to fall off the house except what I had mentioned above. Even the IRS and usually Georgia liens drop off after 90 days. Also- nice to tell the HOA that you will not be paying their past due fines that they increase annually on the home. Happened to me twice - was nervous, but not anymore. The IRS wants big fish - not a small house sold at a foreclosure sale.

Jacob Pereira · Answer

Thanks everyone for the great advice. I'm pretty conservative by nature, so I'm not too worried about getting into a bidding frenzy, but the added emphasis on it will be a good reminder if I get carried away. Tom and Richard, I love the idea of reaching out to banks directly on their unsold properties. You can also be certain that I'll be refinancing the properties as soon as possible. I believe Brandon Turner likes to call it the "BRRR Method."

And Greg H., I actually haven't had anyone reach out to me about helping spend the money. As you probably know better than I, 300k is not really that much money in our market.

Greg H. · Answer

So......I am dying to know how many people have sent you private messages offering to help you spend your 300K ?

About to have 300k and thinking auctions. Thoughts?

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