All Forum Posts by: Chris Kennedy

Hi Wendy! 

I'm active in the Miami/Fort Lauderdale markets also, and deal with quite a few low income neighborhood properties - Miami Gardens, Opa Locka, Little Haiti, and others...I'm happy to assist/give an opinion anytime, and this is a great website! Good Luck!

@Patrick Lindsey I also suggest next time you try and meet the appraiser at the property and bring along your own comps to justify your opinion of the property value. I have had success with this technique in getting short sales approved. Many appraisers get assigned jobs in markets they are not familiar with and end up pulling sales straight out of public records which show little or nothing about the condition/situation of the sold properties. Many appraisers also appreciate this because you make their job easier, they don't need to dig around as much to find comparable sales. 

@Ana Nomys Well, I'm not a listing agent for any REOs, so that wasn't really my point. I have purchased these properties however, and yes, I found that they needed work, but I expected that. They are foreclosures after all, and as you said in the first post, the bank actually discloses that there maybe problems with them. Would you prefer that the bank didn't disclose that there might be defects with the property?

If a buyer is working with a competent Realtor then I would say it's up to the Realtor to make them aware of potential problems and recommend professionals to review title and the property. However, from my own experience, plenty of buyers refuse to listen to advice and go ahead regardless - taking on more than I personally would recommend.

So I guess my main point is you can't just blame big banks and government for people who get into trouble with Homepath properties. Individuals make their own decisions also. And there are plenty of free resources (buyer education programs run by non-profits, websites, ethical real estate professionals, and much more) that help people avoid problem properties or taking on too much debt. Many individuals just choose to ignore the resources and good advice given to them (just like most of us know we should save at least 10% of all we earn, yet how many people actually do this?). Blaming banks and big government for my own problems only serves as an excuse for me not to take responsibility for my own decisions.

@Gerard Charles if I was in your situation I would sell the lot. Really it's just speculation at this point, and it's costing you money every month. Put the cash to work in a cash flowing investment in your new home town. Good luck!

@Brad Tamm  good to see another south Florida BP member! Welcome to the site and see you on the forums! 

I have seen a number of these improved properties that you're talking about. In my experience the banks undertake the most basic of improvements (carpet, paint, sometimes appliances) to make the property more likely to sell. I never got the impression they were trying to pull an all out rehab/flip - more just cleaning up an otherwise horrible listing.

It is my understanding that they get recommendations from the listing broker on whether any further money should be spent on the property prior to listing. They look at how competitive the listing will be in the local market and make a decision from there. They also get periodic (1-2 times per month) updates from the listing broker on activity on the listing. If there is very low activity they either reduce the price, or perform minor rehab in an attempt to move the property - just like anyone would do when they have no choice but to sell a house. 

I don't see any problem with this - all buyers should perform their due diligence on any property, whether bank owned or not. There are plenty of resources out there such as title services, appraisers, home inspectors, contractors (and of course Bigger Pockets) so that any buyer using common sense should be able to know what they're getting into prior to purchase. 

Also, there are plenty of shoddy local rehabbers active in the market. The saying in real estate is "buyer beware" - this has always been true and still is regardless of who the seller is. 

@Nathaniel Busch I'd never heard that before - good information to know, thanks! 

@David Paul I think you are over thinking this. It sounds like you purchased the condo as a long term rental investment. How much are the condo fees? Let's say they are $300/month. That means after one year you have paid $3600 more on top of the sales price for the condo, along with some taxes (maybe $1800), and insurance (if you purchased any - since the association should carry a policy for total loss of the building), and utilities. So, by holding it a year, maybe it is costing you an extra $6000 or so.

If you paid cash for the condo I assume you got it for a decent price, and the extra holding costs for one year will likely not make or break it as a long term investment plan. RE-run your numbers with the added holding costs and if it still looks okay then hang on to it and rent it according to association rules when the 12 months is up. 

In addition, since you bought it as an investment, you're getting a depreciation write off on your taxes also. 

I own some rental condos myself, and the last thing I recommend is upsetting the association and/or management by going behind their back on the leasing regulations. Make friends with them and do the right thing and they will likely go out of their way to assist you when you really need it. Buy Starbucks cards for all the office and maintenance staff - it works a treat :D 

Maybe buying a condo with a rental restriction wasn't ideal, but keep your big picture in mind and congrats on taking action and purchasing an investment property. 

@Jose Diaz I have to agree with @Ben G. . I think the best use of at least some of your loan right now is to market for motivated sellers. Obviously don't use the whole amount, but do get started right away. If you select a good list, and use a mail piece that gets the phone ringing then you should be able to get a deal with a relatively small investment. 

Even if you find a rental property that you can purchase with $10k down it is unlikely you will clear $450/mo. net income to pay the loan, and then you've tied up all your reserves. That to me is much riskier than spending $1000 or so on some well focused marketing. 

Still not sure? You can still find deals without spending much money at all, here are some ideas:

1. Pick a neighborhood you like and go knock on doors and speak to people. I did this a ton my first year in the business. True story: I knocked on a lady's door, she had just inherited the house next door from her father and wanted to sell it. The next day I knocked on another door just blocks away - the guy who answered was a local police officer with a contractors license looking for a house to rehab. I put the deal together and made $12,500! No marketing dollars, just sweat equity :D

2. Call on For Sale By Owners. These people actually want to sell their house - you just need to learn how to talk to them and get them realistic on pricing.

3. Call for rent signs, many landlords will be interested in selling. 

4. Get some decent looking business cards made and give them to people at local groups you're involved with (church, school, gym classes, etc). Nearly everyone is interested in real estate, so it's easy to strike up conversation!

5. Attend local RE investment groups, get to know the active investors, then pair them up with any leads from the above activities. 

Right now I suspect fear is your biggest obstacle - it is for everyone when starting out. Taking action is the best solution. Just do something that will get you involved in the business and see where it leads. 

And by the way, there are plenty of decent folks down here in Miami (yes, some crazies also!) so don't hesitate to ask for help anytime. You're in the right place for it! 

Best of luck! 

@Nathaniel Busch I'm interested to know why you should use the lesser of fair market value or cost basis? Is this a legal requirement? 

Thanks!