Ttinco, I could give you some directions here but find out the laws in which your state looks at capital gains or time you must own the property etc. In MN here where we had some horrible flippin incidents they make sure the home owner at least lives in the property for 3 mo or they smack major gain taxes.....
Capital gains on a house owned for three months can't be "fudged" even if you live in the house as your primary residence. It needs to be your primary residence for 2 out of the last 5 years to avoid capital gains. Taking advantage of someone about to get foreclosed on and stipping their equity seems to be morally unethical. You must be able to come up with a more satisfing way to make a living. Earn it the old fashion way or buy homes that need work and fix them up for a profit. I know people doing that and making six figures and they can sleep at night.
Right Wing and I live in the same area and they have appraisers, loan officers and a bunch of other people going to jail for flipping. I know I don't look good in stripes.
Right Wing and I live in the same area and they have appraisers, loan officers and a bunch of other people going to jail for flipping. I know I don't look good in stripes.
NStar, I'm not talking about doing anything illegal or immoral.
It is my belief that there is a TON of money to be made by buying pre-auction foreclosed upon properties from banks.
The people have already lost them, and the banks don't want to be holding them. A friend of a co-worker makes a very nice living off of this---some he just sells on the market, some he does a little fix up on. The little punk appears to be making a freaking TON of cash(yes, I'm a little jealous).
It is my belief that there is a TON of money to be made by buying pre-auction foreclosed upon properties from banks.
The people have already lost them, and the banks don't want to be holding them. A friend of a co-worker makes a very nice living off of this---some he just sells on the market, some he does a little fix up on. The little punk appears to be making a freaking TON of cash(yes, I'm a little jealous).
I know bankers and they don't want to hold houses. Bad spot for them. Getting to know a banker who is going to sell them to you without putting it on the market will be the trick. A builder I work with carried a second behind a $120K first. His second was 35K. The property was in foreclosure and he could buy out the property during the foreclosure time. I was going to help him and buy it. Finish the basement and turn it for a profit.
A couple of problems. One you can't inspect the property. Two you can't get a loan a property that is in the foreclosure process (can't get into the property for one thing). So you have to be able to pay cash and I could. The seller still has the right to reclaim the property. Third thing the first position mortgage is entitled to everything they are owed. Waited until the end of the foreclosure time so they couldn't reclaim the property (which wasn't going to happen anyway but then you can at least sell it). The first mortgage gave us a payoff of close to $160K with interest and fees. The builder let them have it and is now offering to buy it form them but not at 160K. Now the other three things have disappeared. You can go get a mortgage on it. It's just a matter if they are willing to take an offer below the 160K number or if they are going to market it on their own.
So far they didn't take the offer but its hard to say if the decision maker is making the decision when you get a bunch of attorneys involved.
Not being able to inspect the property is a big problem in my mind. If you have ever been in a foreclosed property they get trashed. They will do everything thing to get even with the world including taking the kitchen sink.
A couple of problems. One you can't inspect the property. Two you can't get a loan a property that is in the foreclosure process (can't get into the property for one thing). So you have to be able to pay cash and I could. The seller still has the right to reclaim the property. Third thing the first position mortgage is entitled to everything they are owed. Waited until the end of the foreclosure time so they couldn't reclaim the property (which wasn't going to happen anyway but then you can at least sell it). The first mortgage gave us a payoff of close to $160K with interest and fees. The builder let them have it and is now offering to buy it form them but not at 160K. Now the other three things have disappeared. You can go get a mortgage on it. It's just a matter if they are willing to take an offer below the 160K number or if they are going to market it on their own.
So far they didn't take the offer but its hard to say if the decision maker is making the decision when you get a bunch of attorneys involved.
Not being able to inspect the property is a big problem in my mind. If you have ever been in a foreclosed property they get trashed. They will do everything thing to get even with the world including taking the kitchen sink.
I currently am a Sr. Sales Manager for an asset management company. I am also a real estate broker in Los Angeles and am/was a direct agent for many different banks and asset management companies like the one I work for now i.e. I was the banks realtor. Did my share of investing as well but since the REO market dried up in Los Angeles had to adapt to survive. I now basically manage and market REO/Foreclosures nationwide for a multitude of different banks. One being a very very large bank that also services loans for hundreds of different investors that sell through me. I am the guy that hires the agents, attorneys, contractors. I coordinate it all from evictions, repairs if necessary, marketing, negotiating contract and closing. All their properties get sent exclusively to our company or one like it the day they foreclose. There are a few big companies like the one I work for that banks contract or they have their own internal marketing dept. but I guarantee you its almost impossible to buy direct anymore before it hits the market. Maybe somebody might put out a list for an auction but its mainly a marketing gimmick for the crap they cant sell and are ready to fire sale it. The days of buying "bank direct" for 25-50 cents on the dollar are over. Sure the banks do not want to hold on to these properties but they are not giving them away either. They realize that REO's are assets now and not an encumberance. They are looking for market value. I guarantee that all files that go REO are valued by a realtor and seperate appraiser and are marketed in the local MLS. Of course there are exceptions to the rule but ver very rarely will a F/C be sold before it hits the market. Another thing is these companies that offer lists of foreclosures are 99% bogus. I get calls all the time from people who buy these lists for property that I sold 6 months earlier. Preforeclosure and Trustee/Sheriff sales are the way to go but you need to do your homework and have a little experience before you give it a shot. There is nothing unethical buying homes that are in default or preforeclosure. It can be a win win situation for both you and the owner who is obviously in financial trouble. I cant stress enough the need to research extensively for possible title issues, unknown marketing issues, geological stability, tax liability and a host of other problems you can get blindsided with before you purchase, especially if you are buying at Trustee/Sheriff sales at the court house where you have minimal to no protection from title insurance.
Just giving you some insight from an industry insider for about 10 years. Any questions feel free to ask although I dont usually hang around here. Usually at another sports forum but decided to look around for other options.
Just giving you some insight from an industry insider for about 10 years. Any questions feel free to ask although I dont usually hang around here. Usually at another sports forum but decided to look around for other options.
Nut Flopper ~ nice post. I totally agree that the days of buying something at a huge bargin are over. There are tons of pitfalls in buying foreclosures like you listed. It isn't as easy as some people seem to make it out. I know a good appraisal outfit up in the Minneapolis area if you ever need one. Thanks for posting your expertise.
Northern Star
Northern Star
Great info Nut....much appreciated.
I know damn well that I'm not going to get ANYTHING at 25-50 cents on the dollar. I'm expecting something more along the lines of getting it at 20-30K below market value, spending 4-7K in fees per buy and sell tx (8-14K total), and ideally clearing 6-16K per flip (Totally theoretical "median" assuming that all goes well....). Am I off base thinking that this is reasonable?
I have access to an "all in one" mortgage broker, title agent, etc who gives me a "friends & family" discount of 1/2 percent for all the paperwork-and I mean ALL.
BTW....There is a segment on 20/20 tonight about this exact subject.
I know damn well that I'm not going to get ANYTHING at 25-50 cents on the dollar. I'm expecting something more along the lines of getting it at 20-30K below market value, spending 4-7K in fees per buy and sell tx (8-14K total), and ideally clearing 6-16K per flip (Totally theoretical "median" assuming that all goes well....). Am I off base thinking that this is reasonable?
I have access to an "all in one" mortgage broker, title agent, etc who gives me a "friends & family" discount of 1/2 percent for all the paperwork-and I mean ALL.
BTW....There is a segment on 20/20 tonight about this exact subject.
MRPOOPS said:
he's in business with his brother. they buy the homes and either flip them or hold them (renting them out to tenants).
initially, he and his brother pooled about $500k together...their whole life savings. after they used that up, they put the houses that they were holding into a land trust and got a bank to lend them 75% of the total appraised value of all the homes in the land trust as a line of credit. they draw on the line of credit to buy more houses.
when you get a property for $150k and it appraises at $250k, you are in effect borrowing 125% of the cost of the home. as long as you dont screw up...you can't help but become a millionare in a few years. which is what he is now. 32 years old and has a net worth of $1.3 million.
it could be me but, i dont want to work as hard as he does. he also has bigger balls than me. its one thing to throw $300 on a college football game. its quite another to quit your job to invest in foreclosed real estate, put every nickel you own into it, and sign personally on a $1 million line of credit with a bank.
risk and reward.
a few more points worth noting regarding his success:
1) he doesn't buy every property he sees. the key is buying it significantly below the market value. he always has to spend money to get it ready to either sell or rent. if you buy a property wrong (spend too much) you won't be doing this very long
2) i believe that he has picked the right niche...small to average sized homes. he is buying houses in the chicago area between $100k and $250k. homes in this range are easy to move. if he was doing bigger homes...say $400-$500k, i think he'd be spending most of his time trying to sell them as the market for the higher ticket homes has slowed down in relation to the $200k homes.
3) he has benefited from the 10-20% annual increase in residential real estate valuations. this may not go on forever. if you do this in california or new york, you could get burned badly.
1) he doesn't buy every property he sees. the key is buying it significantly below the market value. he always has to spend money to get it ready to either sell or rent. if you buy a property wrong (spend too much) you won't be doing this very long
2) i believe that he has picked the right niche...small to average sized homes. he is buying houses in the chicago area between $100k and $250k. homes in this range are easy to move. if he was doing bigger homes...say $400-$500k, i think he'd be spending most of his time trying to sell them as the market for the higher ticket homes has slowed down in relation to the $200k homes.
3) he has benefited from the 10-20% annual increase in residential real estate valuations. this may not go on forever. if you do this in california or new york, you could get burned badly.
Couple of points, the number one way to become a millionaire in USA is inheriting it, number 2 is real estate Your friend didn’t exactly start in the dugout on his way to become a millionaire. Starting with his brother and $500,000 is a very good starting point for someone less than 30. Real estate has gone up nationally by leaps and bounds the last ten years. You could have bought just about anything in Minneapolis market and made money. My sister bought 25 acres for a couple of horses they own about 25 miles from downtown for $100K. Now developers are offering $1,5 million. Hard work? No. Little luck? Yes
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I own a couple of investment properties and they continue to go up in value. I will give you an idea of a good type of property to buy. I have one on a lot that is splitable. The lot I own is larger with the house on one half and garage on the other half. I will split the lot when I am ready to sell. The amount I will get for the house won’t go down and then I will own a lot free and clear. At that point I may build a new home for an investment. I like single-family homes that are in effect starter homes. There will always be a market for these if I ever want or need to sell.
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Currently I am looking for land to build investment properties. Having a line of credit to do these investments is a good move because you only pay interest and not fees to purchase.
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Good Luck
<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com
fficeffice" /><o></o>I own a couple of investment properties and they continue to go up in value. I will give you an idea of a good type of property to buy. I have one on a lot that is splitable. The lot I own is larger with the house on one half and garage on the other half. I will split the lot when I am ready to sell. The amount I will get for the house won’t go down and then I will own a lot free and clear. At that point I may build a new home for an investment. I like single-family homes that are in effect starter homes. There will always be a market for these if I ever want or need to sell.
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></o>Good Luck
TTinCO said:
That is very reasonable. About 8-10 years back I would not do anything for less than 30k but as the market slowly went through the roof I had to start doing higher volume with less profit because it got too competitive and a lot of new Carlton Sheets wannabe's F'd the investor market in LA. Now its not even worth it to me to try. I used to be able to buy SFR's in south central LA, Compton and Long Beach for 60-70k and flip for 130k-150k with the the right appraiser. Now you cant even touch that ghetto crap for less than 200k. Our market is WAY out of hand at the moment. Every so often I will pick up a small POS out of state for under 10k and lease option it to make a few dollars but I dont have the time for all the legwork.
TTinCO said:
just know that everyone is doing that now and lots of ppl show up at auctions and its hard to end up with a good price
I believe the best investment is brand new single family homes
new homes appreciate very very nicely and sell themselves
they also have a 1 year warranty so I have no expenses fixing them up
Holy, I think the key to buy directly from the banks before the property goes to auction.
Your now home concept is a dangerous one around here. The growth is amazing & they are a dime a dozen (and further away from the core cities every day). Highlands Ranch, Colorado was one of (the?) largest planned communities a few years ago, and people are having a tough time selling now for what they bought for 5 years ago. In all fairness, a lot of that probably has to do with the tech bubble bursting.
Your now home concept is a dangerous one around here. The growth is amazing & they are a dime a dozen (and further away from the core cities every day). Highlands Ranch, Colorado was one of (the?) largest planned communities a few years ago, and people are having a tough time selling now for what they bought for 5 years ago. In all fairness, a lot of that probably has to do with the tech bubble bursting.
Can Provide Info on Preforeclosure Homes
In my line of business, I view approx. 40 properties in a week. Sometimes I extend my tour to homes that are about to foreclose so that I can offer help to owners that needed my services to sell their homes. If owners are willing to sell, this is the best time for investors to make an offer. The advantage of this scenario is that the owner and investor can agree on terms. If it goes past this stage and a sale did not occur, prospective investors will need to participate in an auction by the county court house. This process can be frustrating as auctions on specific properties can get moved from one date to the other. The other downside is that an investor must come up with cash.
Let me know if you or anyone need info on pending foreclosures or other real estate. I especialize in the San Francisco Bay Area specifically San Francisco and Alameda Counties.
In my line of business, I view approx. 40 properties in a week. Sometimes I extend my tour to homes that are about to foreclose so that I can offer help to owners that needed my services to sell their homes. If owners are willing to sell, this is the best time for investors to make an offer. The advantage of this scenario is that the owner and investor can agree on terms. If it goes past this stage and a sale did not occur, prospective investors will need to participate in an auction by the county court house. This process can be frustrating as auctions on specific properties can get moved from one date to the other. The other downside is that an investor must come up with cash.
Let me know if you or anyone need info on pending foreclosures or other real estate. I especialize in the San Francisco Bay Area specifically San Francisco and Alameda Counties.
