All Forum Posts by: David Fritch

 Sorry so late in answering. 

We used a hard money lender out of Seattle called Veristone for our pre approval letter or 3.25M. They have a rep here that attends the BP Meetup that I organize. They are great folks and really worked with us. However their terms were 1% of principle per month as an interest only payment and 3% origination fee which put us with big chunk out of pocket and in an negative cashflow situation.

 Obviously, once we had won the "auction" we immediately went to work on finding more sustainable financing. We landed with a local credit union. This type of thing is their bread and butter and it didn't hurt that one of our partners sits on the board (not the lending committee, to be clear) and gained quick access to the right people because we only had 30 days to close. 

We obtained a 3.25M loan at 4.75% interest amortized over 25 years and fixed for and due in 7 years. They could only lend 20% of the purchase price so we gave them our down payment of 650k and we had to pay another 161k which covered; appraisal, $27,300 origination fee, prorated taxes, and a couple other minor prorations, then Auction.com's 5% premium, as well as 100% of the escrow fee and title insurance costs (all part of Auction.coms non-negotiable Purchase & Sale Agreement). 

Purchase Price:  $3,250,000

Appraised at: $4,050,00

Current NOI: $380,400

Cap Rate: 8.5

The exterior is very outdated so we have a 3 phase plan for improvements and raising rents as we can over the next 3 years. It's 3.5 acres on the corner one of the busiest intersections in town. Three structures on 3 different parcels so exit strategies abound. 

I own a whopping 1.39% of this deal. I just feel fortunate to have had a front seat to all of it. I've learned so much!

So to answer my original question as to the validity of this auction it turned out to be the real deal for us in this case. However I have learned a lot about Auction.com and ghost bidding is just the start. It seems thh pitfalls in there residential and commercial auctions are sightly different. There are definitely lots of ways to get hurt badly in their game. That is for another post. If anyone is thinking about going after a commercial property with them feel free to contact me and I'd be glad to help. 

I wanted to give an update on this deal. We closed last week. We won the auction at 3.25M. I was pretty skeptical up until the end that we'd actually close on it. The seller didn't even give any kind of commitment until 10 days before we closed. 

I think we were the only ones bidding from 2.5M on. The ghost bid just kept pushing it up. They had our letter of Pre Approval so they new exactly how far we'd go. I might have handled things differently but I wasn't the trigger man. I just watched from my phone at work. It's interesting how they changed the minimum bid a couple of times to milk every dime out of us and how the "reserve not met" button turned to reserve met a couple minutes after the auction expired. Auction.com is a bunch of sharks and they're going to make every bit of money they can. 

We tried getting multiple letters of approval at different prices and submit them last minute so they auctioneer/ghost bidder couldn't see our ceiling. There's a chance that strategy could work, especially if you had multiple registered accounts which would be a chore in itself. 

If you wanted to get the best possible deal, you could register, follow the auction and then make a slightly higher offer than the winning bid direct to the listing broker.

All in all it's a good deal and appraised for 5.5M based on current NOI, and we'll increase that.

Welcome Marques from a fellow Tri-Citan (Tri-Citizen?)! 

We have a meetup of investors the second Tuesday of each month. It's a great group and you will learn a lot and meet a lot of other active investors in the area if you come. Message me your email address if you would like to be added to the list.

Best of luck!

Let me first acknowledge that your idea of getting a presence in a robust and growing vacation area sounds like a winner. Hopefully you can get a foothold there and develop a customer list and get your marketing and business plan dialed in and get more properties and grow like crazy!

My idea is to finance the house and the business separately. Traditional financing on the property, private lending or seller carried on the business. 

Bring the bank whatever you can find of the sellers records as well as a concise business plan of what you will do and work with them to figure out what they will require to take on the business loan...  maybe a year or two of good performance with records?

Who knows, maybe go the distance with a seller carried note. There are usually lots of advantages for both parties. 

Ashley, 

You're on the right track. In order to succeed you have to do the right activities. You've prospected and now you're going to make an offer. Start low. Stick to your 10k number. You can always call back and offer more later right? Here's what's going to happen; you're going to go in there and look at the home as objectively as you can. You're going to have a hard time because you're going to be nervous about the negotiation. then you're going to make her an offer. 

You're not experienced enough to make a thin deal work. You need a solid meaty deal for your first  both financially and psychologically. 

Don't worry about Michael Quarles. Let Michael do Michael and you do you. You're way to early in the game to worry about advanced negotiating skills. Honestly the best thing you could do is record yourself on you're phone and later listen and try to learn what you're strong and weak at. If you do use Michael's strategies for negotiating, try with friends and family first as he suggests in his podcast. 

You're probably not going to do a deal. That has nothing to do with your skill level or with you at all. You're looking at one deal, you need to be looking at 100 and screening out 90 on the phone. 90% of the sellers out there are not your seller and they're not in a motivated frame of mind that is going to provide you with an opportunity by buying at a low price. If she accepts your offer will be pleasantly surprised. If not then all is according to plan you got the first one out of the way and the next one's going to be way easier. Now, scale up you're marketing 10x, figure out how to get dozens or hundreds of leads. Taking John's course is a fantastic idea. And also Michael Quarles! Micheal can absolutely help you get leads! 

The last deal sounds good. I personally would start lowball and then let her lead to what her moving expenses are. Then it's her idea and she gets a win. But I wouldn't make it easy for her, she would have to meet some kind of conditions. That's kind of my style of negotiating so it's not right or wrong. 

One last thing. If you could put separate deals and questions on separate posts it's much easier to answer. Good luck and let us know how it goes! 

Dave Fritch 

The average is around 8 months. I have been at it for about 19 months. Three of the sales have been on payments and the rest were cash. You can get top dollar for something if you're willing to finance it. 

If you're not interested in developing the land what you want is a price that is well below (10-30%) of market value. 

There is a lot of rural land out there, like billions of acres. If you markets and negotiate right you absolutely can buy at these prices and turn around and market and negotiate a sale is 3x-10x what you paid. It usually does not happen quick. Land is not like a house or a car that is a need and holds a standard value in a constant market. It is more of a passion product. You are looking to find that right buyer. 

I gave done 8 deals. I learned about it from Biggerpockets Podcast episode 39 with Seth Williams. He is a Michigander like you! IF you listen to his podcast and are interested, let me know. 

Sounds like a tricky one. 

@Rick H. might be able to give you some insights. 

I will message you some contact info. A guy from Idaho that specializes in brokering financing for all types of MH. 

We are taking a run at it but ready to make a deal directly through their broker afterwards. 

I love what you are talking about. It's time for me to start marketing and networking to get off market deals. This one is just one that popped up. I'll post back here about the results.