All Forum Posts by: Nick L.

I have done this and seen it done by others. But only opportunistically, not as a business. 

A multifamily seller will want to see that the buyer has the financial ability to complete the purchase. Most wholesalers do not have that ability.

Also multis have a smaller buyer market and longer due diligence periods. So they're not as attractive to wholesalers.

Occasional opportunities come when a buyer genuinely intends to purchase a building but then changes strategy. Or where the building doesn't suit the buyer but the deal is so good that he can't pass it up. I've bought and sold from friends that way, but not on the open market.

@George Gammon @David Faulkner@Gloria Mirza@J. Martin

What a great discussion! There's nowhere like BP for this sort of conversation. I wish I had joined years ago.

I want to introduce another factor, the psychological factor, and revise something I said before.

Earlier I said that OO residential RE would not see much change from a permanent negative interest rate environment. But thinking about it, house prices behave in positive correlation with interest rates when logically you would expect them to move in negative correlation. So I would actually expect house prices to fall.

When prices and interest rates move upward, people think "Better buy now while I still can!" When they move downward people think "Uh oh, better sell before it gets worse!" This kind of thinking is emotionally based and does not take into account affordability, price/rent ratio, net present value or other rational factors.

Per The Economist, "If you take the 24 years covered by the US data and divide them into three, then the average house price gain when real rates were high was greater (at 2.25%) than when real rates were low (1.7%)".

So how does this play out in a long term negative interest rate environment? Well in that environment you have to assume that the economy is also bad for the average Joe. So now your prospective homeowner has a crappy job, a ton of student/auto debt, and the ability to buy into a falling home price market. No thanks! He is going to carry on renting and OO residential units will fall faster than the deflation rate.

@Bobby Barlow

1. Check title. A title company will be able to run a report for you for a few dollars. Verify that the title company will give you insurance if you win. 

2. Check condition. If possible and legal, go through the house. If it's occupied you can sometimes give the occupant a few dollars to let you in. If not possible, talk to anyone who would know the condition - former listing agents, city workers who might have gone through for code compliance, or anyone else you can think of.

3. Check occupancy. If occupied, is it by the former owner or a tenant? The eviction process may be different. You may be able to offer cash for keys.

Don't forget that the starting prices in online auctions are usually artificially low to attract bidders. Also the sites will often shill bid against you up to the reserve price. Just set the maximum price you are comfortable with and stick to it.

Good luck!

@Curtis Steineke

You will be responsible for paying all liens that are superior to the foreclosing lien. Generally speaking, the only lien you mentioned that will be superior is taxes. But there's no guarantee. If you're serious about the property it's worth $50 or so to have a title company run a "search & hold" report to make sure.

I looked on NOLO and there are three different possible post-sale redemption periods in SD. You don't want to end up paying off taxes and improving the place, just to find that the previous owner comes back and redeems it. Could you buy the redemption rights from him to protect yourself?

@Aron CohenTitle insurance makes everything good from your perspective. Even if there is a title issue the insurer will cover it. You will be able to sell on a warranty deed in the future. 

I'm in a similar position right now. Buying a property from an online auction and seller will only give a QCD. But title is clean and my title company will insure it, so it's all good.

Word to the wise... Have your attorney look over the title policy to make sure all exceptions are standard. Some shady title companies will try to exclude so much from their policies that the insurance is basically worthless. 

If they have the same seller, you can make a single offer with both addresses included. 

Or if your lender requires separate offers, add a clause to both offers that says the properties are a package deal and each will only close with the other.

@George GammonGreat link!

My guess is that long term negative rates will not have a huge effect on residential OO real estate. The whole reason for the negative rates is a weak middle class with diminished earning/spending power, with no more Fed firepower to help out. That same middle class is not going to be rushing out and splurging on McMansions any time soon.

On the investment side, I believe long term negative rates will boost prices at first but settle over time. The initial boost will come as people watch their stocks and bonds decline from negative rates and a weak middle class economy, and look to take charge of their nest eggs. Investment real estate is a natural fit and low interest rates will boost lending. As millennials are weighed down by student debt, auto loans and fewer/worse jobs, they will increasingly turn to renting as they did in the last recession.

But over time all the new real estate capital will have been deployed. Plus commercial non-residential will slowly decline for the same reasons as the rest of the economy, and residential investment properties can't get too far out of whack from residential OO. So the boost will not last forever.

Of course all of this is total speculation, but as WB himself said, this has never happened before and all anyone can do is to speculate. Do you have any quant data to provide insights, like you provide on local housing markets?

On the subject of WB, I just read his new annual letter to shareholders and he made the point that America's GDP growth is not in question. What people are arguing over, and will continue to argue over, is how that GDP pie will be divided.

This is a great point but I feel he is missing the permanent structural changes in the economy due to automation and increased globalization which are permanently benefiting the capital owning class at the expense of the economy as a whole. As a real estate owner I feel this is a good thing but as a member of society I know it is not.

@Mark VejnarYou could open a contractor's account at Home D and/or Lowe's. That will give you credit toward the hard costs on flips. Then you just have to find funding for the soft costs.

But yeah, like you say the opportunities have to come first. Without them you're a cowboy with no cattle!

@Mark VejnarWell you picked the right area of real estate for ****** credit! If you have great W-2 cash flow and can find the right opportunities, HMLs will be lining up to lend to you on flips. Credit quality is not a factor.

Since you're an appraiser by background, can you use re-activate your license and use it to find deals? I know an appraiser in my area who picked up 250 units in the last downturn. Every time a bank commissioned him to appraise a property before foreclosure, he asked if he could pick it up at a discount with 10% down. Enough of them said yes that appraising s just a hobby for him now.

Good for you @Royce J.! I'd be a lot further ahead in the game today if I'd started out by house hacking.

90% LTV sources are hard to find. But you could purchase and rehab a multi with a line of credit or hard money, then refi into a conventional 1-4. With interest rates so low and threatening to go negative you will lock in a great rate for 30 years.