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All Forum Posts by: Eric Medemar

Eric Medemar has started 34 posts and replied 197 times.

Post: HUD homes Buying Guide (part 1)

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

Yes they do handle multifamilies. I have sold a 3 unit and a couple of 2 units that were multifamily homes. They are not nearly as common because multifamilies are not nearly as common, plus if purchased correctly multifamilies generate enough income to pay for themselves, thereby avoiding foreclosure all together.

Eric Medemar

Post: HUD homes Buying Guide (part 1)

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

I have bought alot of HUD homes personally and sold alot of HUD homes to investors, the feds have only come by once or twice, but no big deal. Just kidding, what ryan says is right on the only trouble that you can get in when dealing with HUD homes is falsifying your buying status, you can say your an investor and then live in the home as an owner occupant, but you cant say your an owner occupant and then buy the home as an investor. Though I have seen that done many times as well. Read up on HUD homes dont listen to all the rumors. But do try rubbing the window on the back door of all HUD homes if your wearing the right shoes and rub it 4 times I heard a genie comes out. No its for real, I read it on the internet.

Eric Medemar

Post: House on the Market .... questioning realtor's strategies

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

Toilet $200 (nice toilet)
Vanity $400
Top $150
Faucet $100
2 piece shower/tub unit $300
Faucet for shower $150
Flooring Vinyl $1/sqft
1/4" flooring .50/sqft
Drywall for around the shower $70
Material for framing $50
Plumbing material $300-$400

All in all you could redo a bathroom, without doing your own work for roughly $3000 if you are smart about it.

Post: Why don't more people flip?

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

At first glance it seems that people dont become real estate flippers becasue of the risk involved. Is real estate investing really risky though?
To me, the measure of risk is how many factors are there that cannot be controlled. People might say that bungee jumping is risky, it may be risky if your doing it off a shaky wood bridge by a drunk guy in mexico, but bungee jumping is really not risky at all when you are doing it at a place that does bungee jumping everyday and has a time tested track record.

When you say something like bungee jumping is risky you are really saying that it puts fear in you to take a chance with someone else, or something else controlling whether or not you live or die. In real estate, a transaction could be risky if you dont know and understand your market and what the current real estate trends are in your area.

By becoming an educated investor you can all but eliminate risk. If your market is slow you must buy low so you can sell low. If things are changing very quickly then do some wholesaling so you never actually have to hold a property. Learn the costs of materials, learn how to pull proper comps, learn to inspect a property correctly, and above all learn to trust yourself.

I believe that the one reason more people dont get into flipping properties is not because of risk, but instead because of self doubt. They see themselves as the drunk guy with the bungee business on a shaky bridge in Mexico. Educated real estate decisions carry a small risk factor, uneducated real estate decision are very risky.

I talk to at least 300 people a year who want to invest in real estate but have not, will not, and cannot. They have not because they dont believe that they are smart enough (too risky). They will not because they dont think they can never be smart enough. They cannot becasue they wont allow money to be invested with a dumb person (themselves). Meanwhile in the exact same market that is "so risky" I am making money hand over fist ($100,000+ already in 2007) :beer: . Which further proves people may think that they dont invest because of risk, when in reality they dont invest because they dont trust themselves.

Post: HUD homes Buying Guide (part 1)

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

If you were talking about the area on my site all you need to do is enter your zip code in the area above my picture and it will take you to your states HUD site. From there its pretty self explanatory. I just made an easy area for people to go to the HUD site without so much clicking.

Post: HUD homes Buying Guide (part 1)

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

It seems like 10 or 15 times a month I get emails from people wanting to know more about the purchase of HUD homes. I have personally sold more than 20 HUD homes as an agent and have bought quite a few myself. Two of the HUD homes that I purchased last year for rehab have recently sold generating me a $35,000+ profit. This being said there must be some money making possibilities with these bad boys.

For newbies and seasoned investors alike, HUD homes are a great way to buy foreclosures because they are done in an auction style format with a specific time frame. Many of you lose out on great deals because you have to work during the day or have other obligations that aren’t conducive to looking at real estate. HUD homes work out great because bids are due by midnight on the day that the website lists. This will enable you to go through at your own leisure so long as your bid is put in by midnight on the day that the auction ends.

HUD homes are listed as either daily-all purchaser or owner occupant or daily owner occupant.

Daily all purchaser means that the home is open to all bids from both owner occupants and investors. New owner occupant homes come out every Friday and are listed as owner occupant for 10 days. Every Monday owner occupant homes from 2 Fridays ago turn into daily all purchasers if they have not sold yet. This means that the bids are due Monday by midnight. Many times owner occupant homes that make it past their Tuesday bidding time will end up going all the way to daily all purchasers. If you’re an investor who can’t look at homes on Monday be sure to go out over the weekend to check out the listings from the 1st Friday. One other way that properties end up going from owner occupant to investor is if the deal falls apart during the owner occupant period. Every Friday the entire HUD list is updated with new owner occupant homes, new daily all purchaser homes and price reductions on existing inventory. Homes with bids that are being considered will have read letters that say to check back after 4:00 to see if HUD decided to take the bid. Bottom line is the days to check HUD homes are Mondays and Fridays.

Owner occupant means that the home can only be purchased by someone who intends on living in the home for at least a year. A word of caution the penalties for falsifying that you are an owner occupant when you are actually an investor can be fines not to exceed $250,000 and up to 2 years in prison. New owner occupant homes are listed every Friday and the bids do not have to be turned in until the following Tuesday. This 5 day window works out great because it allows so much time to go through the property before the actual bids are due. After the initial 5 day bidding period the bids are then changed to daily owner occupant. Daily owner occupant means that bids will be due each night by midnight until the property sells or turns to daily all purchasers.

Locating HUD homes. There are alot of websites out there that would have you pay to get updated HUD listings but there is no need to pay for them the listings are FREE. I have put together a HUD finding tool on my blog (see my signature), just enter your state in the box over my picture and you will be transfered to the HUD website for your state. Note California Residents must choose Northern or Southern California.

Bidding on HUD homes can only be done by licensed realtors. You are required to have either a verification of cash funds or a preapproval letter in order to bid on a HUD home. Agents are required to have you fill out all of the paperwork and collect your earnest money prior to submitting your bid. Some agents do not require this, and they will submit your bid for you prior to filling out all the paperwork and collecting the earnest money. You will be required to give the agent either your Tax ID number or Social Security number, along with your name or business name, and address. The agent will also need your bid amount and the amount of closing costs that you would like HUD to pay. The agent will then enter all of your information into the agent section of the HUD website.

Bid results are posted the following day at 4:00. Daily all purchaser homes or daily owner occupant homes that come out on Friday have a bid due date of that Sunday at midnight. If bids are placed anytime over the weekend the results will be posted on that Monday at 4:00 unless you are bidding on a new owner occupant home in that case the bids would be due on Tuesday with the results coming out Wednesday at 4:00. Bid results is the place you can go to find out what the most recent homes have sold for.

Bid Statistics is where you can find out what all previous offers have been, and what was finally accepted. Bid statistics updates vary per state but many states update bid statistics every Friday. Bid statistics is a great place to do your research on what prices have been getting accepted in your area. Comparing accepted price versus the HUD asking price can give you a good idea of how low HUD is willing to drop their prices.

Closing a HUD home is just like closing on any other home. The major benefit to buying a HUD home is that they allow up to 60 days to close after all of the contracts have been signed. HUD does not take into account the amount of days that you will take to close when looking at your offer. Many times other homes for sale will take a 2 week closing contract over a 6 week to closing contract even though the 6 weeks to close offer might be for more money. HUD does not care how long it takes you to close so long as it is within the 60 day time frame. If you end up going past the 60 day closing period you can apply for an extension.

Wholesaling a HUD home can be a great way to make money when you have none. HUD homes work especially great for wholesaling because of the long closing period that HUD allows. The one problem that HUD homes can pose when wholesaling is the lack of ability to inspect (see inspection section). It will make it much easier to wholesale if the person you are selling to is willing to take the home in "as is" condition. Wholesaling HUD homes can be done as explained above (see wholesaling section), namely you would want to use a “back to back closing”. Also, having a cash buyer on a HUD wholesale will make things much easier if you are going to use the back to back closing. I typically buy using my line of credit, and then wholesale the property the following week or later that month depending on the type of buyer.

Closing Date Extensions are bought in 15 day increments for $15/day. This means that to get even a one day extension it will still cost you $225.00. The extension must be paid for with a cashiers check before closing. Many times HUD will waive the extension fee and credit it back to the buyer at closing if the buyer is an owner occupant. HUD is not so lenient on investors; normally they do not refund the extension fee for investors. When you submit your funds for the extensions you will be required to submit a letter stating why you are needing the extension. I have never had HUD try to verify the reason given on the letter. The typical letters that I write usually say something to the effect of "the buyer is having trouble obtaining financing because the previous lender lied about what they could do; but the buyer now has secured the proper financing". If HUD does not grant you a closing extension then you would forfeit your earnest money.

Earnest Money on HUD homes is non-negotiable, if your are buying a home under $49,999 the earnest money is $500, if the home is anywhere over $50,000 then earnest money the earnest money is to be $1,000. If your realtor follows HUD guidelines then your earnest deposit check will be due prior to bidding when you submit your contract. Some realtors will wait to collect earnest money check until after you have won the bid. HUD guidelines also state that the money must be in certified funds. I have seen many realtors just take a regular check and HUD didn't require them to change it. You will however be required to supply certified funds for your extension period if you pass your closing date.

Closing dates on HUD homes are 60 days from the day that the contract is signed by HUD. HUD does not take into account your closing date when looking at offers. There is actually not even a space for the closing date on the bid form that your realtor will use. When you sign your contracts their will be a space on the purchase agreement that states when you plan on closing the deal; HUD recommends just putting the maximum time which is 60 days.

Closing Costs that HUD is willing to cover have changed as of Oct 12, 2006. Here is a synopsis of the new HUD closing cost rules. HUD will now allow up to 3% of the purchase price to be included in the purchase price to go towards financing and closing costs. Costs covered within 3% include origination fees of up to 1%. On a 203k purchase HUD will only allow up to 1.5% of the purchase price to be financed in as costs.

Well my kid just woke up better end this one, part 2 will cover financing, rules about looking at HUDs, Insider information about closing costs and commissions that will save you thousands, and quite a few other tips for buying HUD homes

Eric Medemar

Big dogs out there feel free to ad more insight into the HUD process.

Post: marketing questions

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

If you have extremely limited funds what are you going to do when you actually do find the house. If I were in your position I would develop a buyers list first, then work on finding sellers, then connect the two for profit. Wholesaling real estate is a great way to start, just dont mess up the steps 1. Find buyer 2. Find sellers 3. Connect the two.

If you must find sellers yellow paper is cheap for bandit signs, get bird dogs working for you tell them you will pay them when the deal closes. Network with realtors who handle good deals.

Eric Medemar

Post: Hi just coming out of college

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

Be sure to by right dont just buy to buy. Try to pick up each property about 20% under market value. Shop for the right deal and dont fall in love with any property. When you finally do buy dont listen to ANY excuses about not paying rent, unless you can find out a way for excuses to pay. Do buy. Dont get caught in alalysis paralysis. Look for transitional areas to buy in and ride the equity train. I have more but no more time.

Eric medemar

Post: Finding buyers lesson (part 1)

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188

Put out your own We buy house signs, evidently there are quite a few investors who are curious about what you buy. While you have them on the phone pick there brains about what they are interested in buying. With your own signs out you also will appear to be what some would think of as a big time investor. Then you can perhaps sell them something or buy something from them.

Eric Medemar

Post: What Are Your 2007 Real Estate Goals?

Eric MedemarPosted
  • Real Estate Coach
  • Grand Rapids, MI
  • Posts 204
  • Votes 188
Originally posted by "dal1":
I can't really find any definitive answers with regards to 1031 exchange holding period regarding continuing to reinvest. The IRS clearly doesn't want you to do an exchange and sell the property. My CPA and my former National Tax Service accountant with years of experience (also has real estate broker's license) says you can sell the relinquished property in less than a year as long as the equity is "continued" in another like kind deal. CPA said he has clients that reinvest in a shorter period than what I"m talking about.

All of the money must be continued in the next 1031 exchange and it will be spread over two tax years so I may just plan to do that. Both say I'm not in the danger zone of being cast as a "dealer".

I'd have to hold one year and a day at least I understand if I did move in it as a residence and hold for five years to get tax free gain.

I also know you do not have to rent the replacement property. Also, there is some discussion that the hold period for the relinquished property was 7 years. That could make a difference too.

If anyone has any experience in this holding period mess I"d appreciate their input.

You are correct there are no required holding period for doing a 1031 exchange, but the bare minimum you would want to do is one year and even that is pushing, it does not guarantee they will come after you if you do it sooner, but it does greaten your chances of them auditing the transaction. I recently met with a tax man (former IRS agent so I do believe him) who advised me of this. He told me to be on the safe side and truly avoid red flags I should wait closer to 2 years.

1031 exchanges are based on INVESTMENT property that is bought with the intent of an renting or for business or commercial use, in other words not flipping (dealing), so in an audit situation you must be able to show that you intended to purhcase the property for investment purposes but for some unforseen circumstance (job moved, bad spot financially you had to sell).

I wish that you were right in this case because I would save alot of money, but I tore the tax guy apart with questions and this is what I was told. He still has lots of contacts on the inside so I am pretty sure he knows what he is talking about, and its not old information.

But hey if your guys knows more than him, by all means exchange away.