Investing during the boom vs. investing now . . .

[Joshua Dorkin]

Hey all -
I was contacted by a reporter who is working on an article about investing during the boom vs. now and she is looking for feedback. I make no promises, but jump in and leave your feedback and perhaps we can get you in print (large market newspaper).

--Where do investors typically find future investment properties? Auctions? The resale market? Both?
--What’s a typical deal like?
--What’s the expected profit now?
--What are some limits investors face now that they didn’t have to face back then?
--Who’s buying these rehabbed investment properties?
--How are these investors finding buyers?

So . . .

[Aaron Mazzrillo]

Originally posted by Joshua Dorkin:

--Where do investors typically find future investment properties? Auctions? The resale market? Both?

Not sure what you mean by 'future' investment properties, but I will let you know where I am getting deals. The REO ballroom auctions are a waste of time. They have figured out how to get maximum dollar out of these properties and almost exclusively sell to FHA buyers which is in their best interest. Even if an investor 'wins' the bid, more often than not, the bank comes back and rejects the bid.
Court house auctions have a lot of action. Competition is very tight and it is an experts game. Uneducated buyers really take a lot of risk going down there with a pocket full of cashier's checks. Margins are not very good there either. Even the experts are getting less than 20% on their money.
Short sales can be profitable, but this has turned very risky with the FBI calling short sale deals where investors flip these properties for a profit fraud. If I buy a short sale listing, I am holding it as a rental.
REOs are the low hanging fruit in this market. The most successful investors have teamed up with REO Brokers and are fed the best deals. It is really a relationship game. However, good deals can still be found by hunting in the MLS and making lots of offers. The majority of my deals actually come from equity sellers. Even in this market 30% of the houses in the country are free & clear. We market to these property owners and do very well focusing on this niche.

Originally posted by Joshua Dorkin:

--What’s a typical deal like?

Cash is king in this market. As an investor, there isn't any financing available except hard money, seller carry back terms, or buying discounted notes. It is still possible to work deals though with a little creativity. Many people have retirement accounts that are earning very little in this market. These present a great opportunity to partner up and use their funds to invest in your deals.

Originally posted by Joshua Dorkin:

--What’s the expected profit now?

A retail flipper should be seeing 10-20% return on their money per deal. This can be turned 2-3 times a year giving savvy investors a 30-60% annual yield.

Originally posted by Joshua Dorkin:

--What are some limits investors face now that they didn’t have to face back then?

Originally posted by Joshua Dorkin:

There is a lot of competition, financing is non-existent, and getting your retail buyers qualified for a loan is taking longer and longer which equates to more holding costs and risk.

Originally posted by Joshua Dorkin:

--Who’s buying these rehabbed investment properties?

FHA buyers are the number one buyer in today's market. It is interesting that the government has put all their support into a group of people who have low credit scores, need concessions to help close the transaction, and are only required to come to the table with 3.5% down most of which they ask the seller to provide in closing cost assistance. Hasn't anybody told them millions of 'home owners' are losing their houses to foreclosure, not millions of landlords? As a landlord/investor, I have multiple properties in numerous states, high credit, 6 figure checking account, have never missed a payment or even been 30 days late, but because I am self employed, I am considered the most risky borrower and therefore cannot qualify for institutional lending.

Originally posted by Joshua Dorkin:

--How are these investors finding buyers?

The multiple listing services is the fastest way to get your rehabbed properties sold. There are lots of people out shopping for a home and by putting your property into the MLS (listing it with a Broker) it gets the most exposure. A properly priced and finely rehabbed property should see multiple offers within a few days after listing it.