Hello BP! I'm a brand new investor from Wisconsin (Fox Valley Area). I have yet to pull the trigger on a property. I'm currently learning as much as I can. My goal is to BRRRR. For the remainder of 2019 I am working to finalize my refi lending partner (95% there), connect with a contractor to partner with, secure my private lender (fingers crossed my dad buy into my plan!), and continue going through properties, and fine tuning my rehab estimate skills, and BRRRR analysis.
Okay, with this said, I am looking into REO properties as a starting point. I'm checking the big bank REO sites, homepath, and I am contemplating singing up for the Foreclosure.com BP deal.
My question for the community, is Forclosure.com worth it? Is there value there? Anyone have success finding deals there? Just curious to get some perspective.
Foreclosure.com data is garbage, most of the listings are far out dated, the service brings little to no value. your best bet is to follow the sheriff sales in the counties you want to invest in, also follow the filings in CCAP, most properties dont even make it to MLS anymore, they often get sold at Sheriff Sale, if not the majority are on the auction websites for a few months before listing in MLS. I paid Foreclosure.com for advertising as an REO Broker back in the crash, I got full access to their data sets, and really felt sorry for all the people that paid money to subscribe, I did get leads, but that to was hardly worth it, most of the leads, the buyers didnt have any money or credit to buy.
@Benjamin Nitz focus your time on looking at properties, instead of doing all the other things you have listed. Find an agent who understands BRRR and will hook you up with all contacts you need (except your dad, you'll have to do that on your own). There is no REO market to speak of in 2019; the few forclosures that pop up are too usually bad deals.
Q4 is your best bet to buy a good deal, Q1 will br tough - lowest investory of the year typically. A full 25% BRRRR is hard to pull off as a new investor - typically you need about $80-100k spread between purchase and ARV. It's not easy to buy a house for 100k in a 200k neighborhood, except if it has major issues, foundation, mold,..
Much easier to aim for a 15% BRRRR; you will have to leave some money in the deal, but the risk is much lower and it is much easier to do.
Here is the other thing nobody tells you when they post their success stories: there is a simple trick to make it work. For a 25% BRRRR you simply don't do things like new roof or new windows. Why?
Because a new roof is let's say 12k and new widows (with new trim) let's say 8k. That's $20,000 you can "save" on your rehab cost - it will not make much of a difference for the ARV bank appraisal; as long as the roof is still okay and the windows have a fresh coat of paint the appraiser is likly to ignore those. Bam - here is your BRRR. But now you own a property that has 20k in deferred maintenance; so you only cheated yourself.
Scott Schultz/Marcus, great feedback, thanks!
@Marcus Auerbach Thanks again for the reply. Had a little time to think about it this morning, and wanted to shoot you a note. Luckily, my wife is actually an agent, she is about a year in. I am going to have her connect with her broker for recommendations on on contractors.
My goal is to mitigate risk as I get into this, so I will definitely be comfortable leaving cash in a BRRRR if it means I am able to rehab the big ticket items in the process. Last thing I want is to make the ROI look great only to have that deferred maintenance come back to bite me later. Thanks for the perspective on that. I had this in mind all along, and it is encouraging to know I am on the right track with my thought process.
I have been driving around town a lot looking for distressed houses of interest. I was thinking about just door knocking on some of those to inquire about the owners plans for the property. Have you done that all before or know anyone who has had success with that?
@Benjamin Nitz lead generation is a numbers game - if you knock on doors, it will have to be a lot! To get a realistic idea have your wife pull up distressed sales for your target area to get an idea how many are selling for less than 75% of local median. You could also look into mailers or buy on MLS, which is frankly where I find most of my deals.
@Marcus Auerbach Thank you for sharing. It is greatly appreciated as a new investor.