I just purchase a house at auction

I purchased a house at auction the other day. It was intense to say the least. I had been going for a couple weeks just to watch and try to get a feeling as to what I was getting myself into. I noticed something, which a seasoned real estate investor was doing. His name was well known in the real estate investing community, I knew that he was good at this. I watched him as he bid and noticed a tactic that I decided I was going to make my own. Now that I felt comfortable - it was time to identify a home.

The homes are published a few weeks before they go up for auction. There were so many. I needed rules; I wasn't going to just buy anything. You'll find throughout this blog that I have a need to simplify everything. So, I created three rules: I don't buy in war zones (My wife is also involved in real estate and sometimes we bring our kids). I don't buy crap (It could be a great location, but if the home has unmarketable defects - it won't sell). I don't kick people out (Most of the homes are occupied, I feel uncomfortable removing a family from their home for economic gain). Those rules pretty much defined my market. I just needed to make sure that the homes were not occupied, which meant I had to drive by them. I found four homes that I really liked, one of them I loved. None of the homes I could get into, so I had to assume the worst. I ran comps for each of the homes, identified it's after repair value, calculated holding costs, renovation costs, taxes and profit. That gave me my max bid number. And off to the auction I went.

It's a remarkable feeling when you’re bidding against other people for a home. The thing is that they all knew each other, I'm the new guy. One guy even said that 'he'd give me this house if I left and never came back'. The first two homes I lost. People were willing to pay more than I was. Then one day I went to the auction for the home that I really liked. I did the strategy that I learned and got the house for $3,000 less than I thought. On the way out I saw the guy I was bidding against; he looked at me and said 'good luck, you're going to need it'. It was at that point that I knew I had made money that day. I had just made $25,000. Because you don't make money when you sell a home - you make money when you buy it.

Now the fun begins.