All Forum Posts by: John Stevenson

I took the time to run some of your basic information through an appraisal spreadsheet and I came up with a estimated value of $115,000.

This is based on the following assumptions:

1. There should be a 2/1 or 3/2 bedroom to bathroom ratio. If a property has more than that there should be a downward adjustment of $1,500.

2. Your property has 3 bedrooms but the square footage indicates that at least one of the bedrooms is going to be too small. Though 3 bedrooms has more appeal in the market, if they are dysfunctional too small then there will be very little measurable affect to the value. In fact it could actually reduce the sales price, but since I do not know the layout, I did not want to assume too much.

3. I estimate a garage should add about $5,000 to a price.

4. I adjusted the square footage by $45 per square foot. Adjusting the square footage of a property by the the average sales price per s.f. is an over simplification.

5. Comp 2 had a much bigger lot and that was adjusted.

Of course, this is not exact since there very well could be some specific factors that are not adjusted. But it may help.

If you have a recent appraisal on your property then all of that information should already be in there.

A complete summary real estate appraisal on an income producing property will have three parts: Cost Approach, Sales Comparison Approach and Income Approach.

The Cost Approach will tell you what it would cost to rebuild the property, less depreciation, plus the cost of the land.

The Sales Comparison will show you what other investors are paying either per unit or per square foot for similar types of investment properties in your area.

The Income Approach, in my opinion, is the most valuable valuation method for income producing properties as it will take the income stream and convert it to a market value. An appraiser can do this several different ways. A Direct Capitalization Approach will take the average net income and apply a simple capitalization rate. The second and more complicated approach, Discounted Capitalization Approach, will analyze the income stream over a period of several years and then project it ahead for a typical holding period. This income stream is then discounted to present value. The idea behind this is to determine what an investor will pay today for money made down the road. Your appraiser can help you better understand how it all works.

So, trust your appraiser, they are there to tell you how much your property is worth. But... do not think that you can simply divide the appraised value by the number of investors and sell your share for that much. Each investor loses a part of their bundle of rights and that affects the value to that investor. You should have your appraiser value your share.

According to Foreclosure Law, foreclosure proceedings in Maryland may begin when the home owner is 90 days past due on his mortgage 45 days after a notice of intent to foreclose is sent, whichever is later.

If the mortgage contains a "power of sale" clause, the owner of the mortgage may immediately move to sell the house. The home owner must be given at least 15 days notice of the intent to sale and the day the sale will take place.

Once the sale is completed, the home owner will have 30 days to vacate the premises or be removed. Should a mortgage not have this clause, the mortgage holder will have to get a court order to foreclose on the home owner.

One thing that is different about the foreclosure process in Maryland compared to other states is that prior to the sale date, the lender does not have to notify the borrower that a foreclosure action has been filed against the borrower. Most states require that the complaint be served upon the borrower and all interested parties and that the borrower is allowed a statutory time period in which to respond. Also, there are no statutory redemption periods for the borrower in Maryland. The court can set one if they so desire.

It is absolutely essential that a wholesaler or bird-dogger find out what actions require a license and then make sure that they do not cross those lines. Even if you are not "caught," you will burn bridges with local realtors which will make it harder and harder to stay in this field.

You can find out more by checking out your state's licensing board online.

I absolutely agree. It is impractical in many markets to think that you will have 100% occupancy. Even if you have leases on all of the units, there will be annual turnover and that creates lost income as one tenant moves out and another moves in.

It is always better to err on the side of being conservative than base an investment on pie-in-the-sky numbers. A good place to start is to find out the average occupancy rate within your market area. Another is to compare that building's rent to market rents to see where you stand. Then create your own pro-forma on those numbers.

You may want to double check the tax bill. There are usually two addresses, one for the property and one for the most recent address to send the bill. Well, if these are the same, I see your problem.

Another option is to do a people search on the internet. A lot of the search engines have a list of past and present addresses. You may be able to track them down that way.

Best of luck!

That is an interesting idea... I guess it would depend on your motivation. Why a month to month lease? If the property is listed, or will be soon, then that would make good sense. But it doesn't make good sense if you are concerned about "evicting" a tenant. Just telling a person that the lease is cancelled will not make a stubborn tenant move out any more than an eviction notice.

Vacancy and rental turnover is a quick way to lose whatever profit you have made that year. Having a month to month lease only increases the risk of losing 1 or more months of rent when your tenants keep moving in and out. Add on top of that the additional repairs you will need to make to keep getting a unit ready to rent. I do not think the risks justify the convenience.

Commercial property investment requires even a deeper understanding of demographic data; it is not just the population trends that need to be considered, but the demographics of the competition.

For instance, an entrepreneur looking to set up a new car dealership needs to consider where established dealerships are located and set up shop nearby. Car buyers wanting to compare similar models need to visit several dealerships, so they need to be close to one another.

On the other hand, an entrepreneur looking to set up a new hardware store, should look for an area under served by the competition or where new residential developments will be opening up.

Speaking of ease-of-access, traffic patterns can also make a difference, especially near busy intersections. The demographics of traffic can add to the complexity of making a commercial real estate investment.

Large banks do sell bulk REO packages, but in their mind, it does not become a bulk deal until the package includes 50 - 200 properties that are bought sight unseen.

That being said, you could always try to make an offer on 4 or 5 homes at one time as a "bulk" deal. Ideally you would have greater success if all the properties were being handled by the same agent or at least by the same bank. I would suggest breaking down the allocated purchase price for each property in the offer. This will help their paperwork.

Let me know how it goes.

That being said, how many inspection fees will you pay out to find a good home and then lose the bid? Maybe a one time loss of $1,000 would be less than a constant payout of $300 per house.

It would seem that there should be a better way to work the system, but we have to work with what we got and for right now that is working with HUD bureaucracy as hard as that might be sometimes.