All Forum Posts by: Denise Evans

Do not rely on Zillow. Research the property records to find mortgages. Unless a mortgage is more than ten years old, the principal balance will not have reduced by very much.

If a property is correctly listed as a short sale, but the 1st mortgage balance is less than the list price, then a 2nd mortgage is causing the problem.

Call the listing agent to see if they will give you more information that will yield some insights. If not, then talk to some other agents who work in that same price range and area of town. I guarantee you, most of them know the story behind that property.

Then, get back in touch with me.

@Vicky S., I usually worked on properties with loans in the range of $375K to $1.2MM.  Properties in the $375K to 600K range were considered McMansions in this market, and those up to $1.2MM were considered luxury properties. I tell you that so you can compare to your own market. Generally, the banks were more flexible with luxury properties because that market always recovers more slowly than starter homes or McMansions.

Years ago, when I worked on larger commercial transactions, I saw the same relationship. The larger the loan, the larger the discount.  Probably because the fear of a mistake is also larger.

In your situation, you said the first mortgage balance is 20% less than the list price. Why do you think this would be a short sale opportunity? Is the list price any place near the market value? Is there a second mortgage that is perhaps preventing a deal at a reasonable price?

Hardships can be a variety of reasons that people would normally not consider hardships. For example, on Fannie/Freddie loans, an acceptable "other" hardship (besides the check box ones on the form) includes "property or borrower's employer located in an area that has suffered a federally declared disaster."  Baldwin County, Alabama, (the beach area) has had 7 federally declared disasters since 2007.  People finally couldn't keep trying any longer. On every single short sale where that was the only hardship I could demonstrate, every one got approved. That's on short sales dating from 2009 through 2014.  My advice--carefully review those hardship reasons to see if one might apply.

Hi @Scott Steffek, sometimes you just don't know all the facts and hidden agendas. Rather than waste time and emotional energy on that type of deal, move on. It's kind of like that romantic relationship that seemed perfect but just fizzled out.  You'll make yourself crazy wondering why.  Usually, there is no lesson to be learned, it's just something irrational about that situation, or an outside factor (such as another love interest) that you know nothing about and can do nothing to fix.

Don't forget about things like licenses, rental taxes, legal and accounting. Also, even if you never have vacancies, you need to include a vacancy and credit loss factor. A property might be vacant for one week out of the year when you turn tenants, for example. A tenant might move out owing you money, creating a credit loss. You should also calculate a reserve for capital expenditures.  If you will need new appliances, or hvac units, or carpeting in a certain number  of years, you should put a certain amount of your cash flow in a savings account or "sinking fund" each month so you will have the cash when you want to make those purchases.  This is not an expense of the property, but it is a cash flow deduction.

What part of Houston are you targeting? We used to live in Cypress, I worked off the SW Freeway in the Arena Towers, and my husband worked just outside the Loop on Post Oak. Houston has so many distinct areas with their own personality, there are lots of opportunities.

A duplex is a good starter investment because it gives the economies of scale with multiple units, but without jumping into the deep end of the pool with apartments. It will also alert you to multi-tenant issues on a small, easily fixable, scale. For example, people who invest in single family homes rarely think about noise control issues, and extra insulation between units to cut down on sound transmission. If you go from SFR to apartments, you won't think to check insulation and firewalls as a due diligence item. They don't think about pets, their affect on common areas shared with other tenants, and the landlord's responsibility to provide safe common areas. Also you'll gain experience in trying to show a unit and the other tenant is helpful, or antagonistic, and how to handle that. If the numbers work--go for it!

@Tony Gunter

The Birmingham market is stable because of the healthcare and biosciences industries. Parts of town like Eastlake and Avondale are coming back, being gentrified. Trussville, to the NE of town, is a very strong market. Houses in the $50K range are being snapped up by REITs, who are doing $20K of rehab/upgrades, and then placing on the market for rents at $1,200 per month. They are staying vacant, because the market for those houses is down around $700. But, the REITs keep buying more houses. Must be something to do with funky REIT accounting, because nobody seems able to understand it. Properties in other price ranges are hard to find, but there are bargains, still.

If you are interested, I can connect you with someone who used to be a student of mine at University of Alabama College of Commerce, and who got himself through school on income from his real estate investments. He's now in Birmingham, doing well, but always looking for equity partners so he can do more deals. Very conservative, very solid, exceptionally smart and hard working. Never cuts corners. Analyzes everything six ways from Sunday.  Knows the market intimately.

There is a HUGE market of tax sale properties on the state inventory, located in Jefferson County. Contact me via PM, and I'll tell you about that play. It's rather more complicated than a BP post.

@Tony Gunter, greetings from a former UD alum, now living in Alabama.  You can get an eviction fairly quickly in Alabama, but it requires managing the lawyer and the process. For example, most lawyers will file the eviction lawsuit and also ask for damages for unpaid rent, damage to property, etc. This requires personal service on the tenant, which is often hard to do. If your initial lawsuit simply asks for the eviction order (you can amend later and ask for damages) then all you need is what is called "nail and mail" service.  The process server makes one attempt to serve the papers on an adult at the premises, if nobody is there, he tapes a copy to the door, and mails the papers via regular mail within 24 hours. Service is counted as effective from the date of mailing. I recommend they mail the same day--it cuts out one extra day in the process.  You can wait for a Sheriff's deputy to do this, or you can hire a private process server yourself, for around $50. It can be anybody except a party to the lawsuit. Once you have service, the tenant has 14 days to answer. No answer, and you get a default judgment. It's not automatic, you have to ask for it. That's where many lawyers let you down, by not doing things as quickly as they can. The tenant has 7 days after that to appeal to the next higher court (what you call District Court in Texas, but is called Circuit Court in Alabama), but must pay all past due rent into court or the eviction order will proceed.

I currently live in Alabama, but I'm a Texas-licensed attorney. Texas uses non-judicial foreclosure via a trustee's deed. Liens filed before the filing of the mortgage being foreclosed will remain on the property. Liens recorded after the mortgage that is being foreclosed will be stripped off the property. HERE is a link to an excellent article written by a Texas attorney.