All Forum Posts by: Colin G Murphy

Hi @Michael Doucette

As @Arlan Potter mentioned, it doesn´t really work like that. You can deduct loan interest (as it certainly is an important and legitimate expense when buying and rehabbing). Your balance sheet includes your assets (the house) and liabilities (the loan). Your Profit & Loss includes your income (salary, dividends, profits from flips etc) and your expenses (insurance, utilities, rehab etc).

If you ever want to scale, it is worth investing your time on learning how balance sheets, p&ls and cashflow statements interact with each other. Lots of free information and cheap books on this stuff out there. 

Best of luck!

That´s a good way of looking at it @Jim Spatzenfeld - postpone your stress and keep hustling until inventory levels start getting high. At the moment, real estate inventory is slow low that it would take months of turbulence just to increase them back to "normal" levels, never mind getting to a "buyers market" level.

I agree with @Chris Gawlik that it is a crazy situation to simultaneously have record unemployment and record highs for just about every asset category out there. Just hasn´t happened before. Normally when investors have a diverse basket of assets, when one goes down, the rise of another makes up for it. That strategy isn´t so easy when everything (real estate, US stocks, junk bonds, gold, iron ore) are all going in the same direction. When money is basically free and rates will stay low for a very long time, I guess no asset can be priced too high. 

So, I don´t think armageddon is around the corner and the next downturn in real estate might be very fragmented and may not occur for years. I was at a virtual B2B conference lately where one panelist claimed there was $18 trillion in single family equity vs $11 trillion in mortgage debt. Most homeowners are in little danger of being upside down. Still, the most accurate predictor of mortgage defaults is unemployment and the longer it stays stubbornly high, the more distressed sellers you are going to have. I don´t think it will be a bloodbath, but there will be more opportunities than the slim pickings out there today. My specialty is buying in the foreclosure auctions and it is as good a place as any to make money in the next few years. 

@Account Closed A thumbs up by an attorney or title agent is not a guarantee of anything - just a quick search by people who know what they are doing. Depending on the county, a full search would take 7-14 days and cost several hundred dollars per property - not practical for competitive auctions where on most days 50%+ will get cancelled or taken back by banks.

Once the ownership chain is officially verified and you have the certificate of title, a title insurance policy could be issued in your name, your lenders name or a future buyers name. 

Hi @Account Closed - I take your point, but I don´t think it is such as exclusive club. Just because some investors can get title searches for "free" due to relationships and scale, doesn´t mean you can´t bid and buy a handful yourself (especially if you intend to keep them and don´t require the margins of a fix and flipper).  

In terms of established players knowing more about a houses condition - that comes from experience and preparation. You can learn a lot from previous MLS and permit records. Also, some (brave) bidders knock on doors and try to chat to occupants prior to auctions. If a house is vacant, an experienced rehabber can learn plenty just from looking through the windows.

Just to clarify; nobody gets title insurance when they buy in a foreclosure auction. That can´t happen until after you´ve bought it with cash, waited for the certificate of title to be issued (2-3 weeks in Florida) and paid for a title search and policy.

I´m about two thirds through the Bidding to Buy book and I would recommend it to anyone looking to learn more about purchasing real estate in foreclosure auctions. I´ve bought 100+ single family homes in public foreclosures in the Tampa Bay Area in the past 5 years and it is absolutely necessary to understand chain of title & lien history.

In my area, practically everything you need to know is available online and can be accessed in minutes (public records, permit records, property appraisers website, foreclosure website, tax collector website). You learn a process and you repeat it dozens or hundreds of times until you get great at it. I did title research on lots of properties myself before bidding on one - just as people should get lots of practice calculating ARVs before buying. A lot of folks worry about buying a 2nd or 3rd mortgage by accident - those are rare in foreclosure auctions (at least they are in Florida) and you can verify the position of the lien in minutes for any property. 

I did the majority of my purchases in one county and spent a lot of time navigating and learning my way around the websites that provide the background information needed on ownership and lien history. Literally dozens of hours before spending a dime. It helps a lot if you can learn to love and appreciate the process - it is not that complicated once you´ve spent enough hours at it. I had a title agent mentor me through the first 20 or so successful bids. I did my thing, he did his and we compared notes. Initially I missed a lot of stuff that he picked up and eventually I caught up. He got the title work on resale if/when I got one. Later when I started scaling a bit, I stopped doing pre bid title work myself and switched to an attorney who ran the searches on my behalf and provided quick single sentence feedback on what I needed to know (eg. 1st mortgage, no lien or 1st mortgage, unpaid HOA & utility) and I would adjust bid price accordingly. Again, the attorney got the title work on resale when we resold them a couple of months later.

@Account Closed & others: I guess what I´m trying to say is don´t let the mystery of titles and liens stop you from diving deeper into this world. There is a lot of money to be made when the next wave of foreclosures finally arrives. I´m not suggesting you bid without knowing what you are doing - but there is plenty you can learn before you bid actual cash. In most places, the title & lien info you need is in three or four websites you need to learn your way around. Eventually you´ll start seeing the same patterns again and again.

Maybe you need to pay up front for a bit of education or maybe you can convince someone to teach you about title for a zero or nominal fee in exchange for work post purchase. Either way, it will be a worthwhile investment if you stick at it. 

Hi @Trevor Coen

It´s a good question. I´ve bought a lot of occupied properties in foreclosure and while people can get p*ssed off, I have never been physically threatened. It is very important that you approach everybody calmly and respectfully. If people are aggressive, dial things down, never up. Think late night radio DJ voice. Express sympathy, but communicate clearly what their options are (generally boils down to leave soon and I´ll give you some money to help you along, or dig your heels in and we will have to evict. If you want, you can take the line of "I work for a company that...." so they don´t pin anything on your personally, but a corporate entity. 

Hi @Jalon Wilson

It varies by county, but if you are buying in the public foreclosures, you generally have to pay cash for the property within 24 hours. In my local county in Tampa, auctions are at 11am, they take 5% from winning bidder (that you must have in escrow with them beforehand) and you must pay the balance plus court fees by 4pm (cashiers check or wire transfer).

After the auction, defendants have 10 business days to object to the sale (they need a good reason), so the certificate of title (CT) isn´t issued for 2-3 weeks. After you have the CT, you should be able to get a loan from any lender, but prior to getting CT, you´ll find it very difficult because a mortgage can´t be recorded until it has been issued. 

If you are talking about private auctions (auction.com, hubzu, MLS REOS), then you will be buying with clean title and you can get private/hard money lending.

Hello @Hussain Harun

VAs are essential these days. As @Brenden Mitchum said, the properties already scheduled for foreclosure are public record and easy to find. Your VA can take that info, put it in a spreadsheet and add the other info you´ll need, like beds/baths, age, permits, recent comps etc.

If you are using a VA for pre foreclosure info (evictions, lis pendens, tax defaults, divorces etc) then they can look that stuff up on public record also and create a list for you to market to. You need to figure out what distressed seller and property types you want, design a system around it, teach the VA to follow it and have feedback loops so you can monitor progress. 

Hello @Bryce Kennebeck - congrats on starting your real estate journey!

The note from @Chibuzo Umeh above contains some great advice. Forget about spending that hard earned $40k for now - invest instead in your education with podcasts, books and networking. Also, REIA meetings are mostly virtual these days, so you don´t need to travel to attend them.

I personally think getting started without cash (I certainly did) works out better in the long run as it forces you to hustle and get creative. Tap into those reserves of time, energy, discipline and commitment instead. Real estate is best thought of as a long term / get rich slow game, so start thinking beyond the 7 months between now and when you go to mariner school.   

Good luck - plenty of free resources for you on BP to get started.

I think your question has been answered @Haiyang A. but if two mortgages are recorded on the same date, then the one with the earliest page number is senior. e.g. Mortgage A recorded on Book 36/Page 1200 and Mortgage B recorded on Book 36 / Page 1201. Mortgage A was recorded first and is therefore the senior lien.

Also just FYI: if there are two mortgages spaced apart, the newer one is larger and the older one wasn´t satisfied, then a subordination agreement might have been filed which flips the seniority. You´ll see those on the public records / title search. 

If you are not experienced at doing title searches, my advice is to find a local attorney or title agent who will take a quick look for a nominal fee before you bid on the property.