Unless you really know what you're doing, buying a home at the foreclosure
auction is best left for the "big-guns" - people that can
handle the enormous risk involved with paying cash for a house they
never stepped foot in. Think about it for a moment. Would you give someone
$20,000 cash for a beat-up, used car you haven't touched much less took
for a test drive? Not for me right now but something I may consider
in the future. >>>Top
Real Estate agent:
I started with a real estate agent buying a bank owned, foreclosed on
property. Typically when a house is not purchased at auction it goes
back to the bank or corp., the lender that foreclosed on the property.
Banks are not in the business of owning property. They usually enlist
the help of real estate agents and brokers to sell the property. This
is in hopes of recouping at least part of their losses. This is where
I started. – Bank owned houses listed on the MLS with an agent
at far below market price.
Buying listed bank owned
I felt this created the best and least risky place to start. I'd be
able to feel, touch and oh yes, smell what I was buying. I had the professionalism
of a quality realtor and the knowledge of a great lawyer to watch my
What I can do for you:
Remembering my first realtor still makes me cringe. My relationship
with him lasted I think, oh, three weeks? He was a friend of a friend
and showed up at the house at 5pm with alcohol on his breath. Not a
good first impression and the relationship went downhill from there.
I wanted a realtor who knew a bit about finding me a house I could turn
for a profit. Someone who’d call me about a new, bank owned foreclosure
that just came on the market. I was ready to buy, help me. I can be
that realtor for you. Trust me it's much better having a realtor that
understands your goal and has passion about the business.
Look, there's no cost to you. The selling bank pays
my commission. I'll also promise to help you before, during and after
the sale. You see, I want you to be a success. Why? In today's market,
'for sale by owner' doesn't work nearly as well as listing your property
with an agent. Exposure to the greatest amount of potential buyers on
the MLS is key. Remember at least 80% of buyers want to walk in, set
their furniture and live. You'll be providing that type house. In a
few months I'm hoping you'll list your now beautiful house with me -
we're off to the next house. My mission is your success. A win-win situation.
With the amount of bank owned houses on today's market, there are plenty
of houses out there for all of us.
Give me a call:
Fell free to call me. Let's talk real estate. Tell me what you're looking
for. What price, area, budgets, etc? Go ahead, I don't bite. All I require
is for you to be honest and straight forward – that's all you'll
get from me. Jim, 847-791-8742 or write me, email@example.com
Another very important way I can help is through the
people I know - the electricians, plumbers, roofers, etc. These are
people I didn't have when I started. God, I wish I had. They'd be happy
to give an honest quote for the work you need done. I've built good
rapport with many of these people, always got a fair price, paid them
on time and never bounced their check. You treat these people like gold.
They're your lifeline to success.
Intrigued and want to know a bit more about my adventures
and flipping in general? Read below
Ok, here come the guts of the whole project. You've bought a house that
needs some work. Well, it's time to get down to business. It's time
for some dirty hands and several long nights. I've bought, fixed up/upgraded
and sold for a profit and that first house nearly cost me my health.
The stress was unlike anything I've ever experienced. Why? Because all
I had was a theory, a bit of cash, the yellow pages and some credit.
I thought, rethought and worried about every part of the project. I
had to but it didn't matter. I have a passion for real estate that’s
only intensified over the past 20 years. Besides I was determined to
make this venture profitable and I do mean determined. Friends and family
were so upset and concerned thinking, "what is he doing?"
How much time it took:
Of course throughout the project I also managed a full time job. Commit
yourself and tell your loved one you're busy. I worked at my job eight
hours, five days a week. After work I spent every other free minute
at the project for four months. Six to nine pm during the week, until
2am on Friday, about 10am to 2am Saturdays and 10am to about 6pm on
Sundays. The only free time was on Sunday after 6pm. Oh, how I loved
Sundays after 6pm.
When working on a project, certain things I do and certain things I
job out. Things on the project I will not touch include; roof, windows,
siding, building a garage, cement work, plumbing, electric and some
carpentry. Now, I'm sure you're thinking that's most of the work. It's
not. You'll easily have a few hundred things on your "to do"
People who know people:
Networking is the name of the game. I'll give you an example. On my
first project I needed all new windows, roof and siding. I thought it
would be much cheaper finding a contractor to do all these and give
one quote. I also realized this was going to be the biggest expense
of the project. I went to the phone and newspaper ads, called and set
five appointments for quotes. My highest quote of the five was for $22,000
and lowest was $12,500. Guess which company I hired? Yes, the $12,500
bid. I had too - my original budget was only $10,000 and I wasn't about
to nearly double this part of the budget. Turns out the company I hired
then hired three different crews to complete the job. I quickly realized
there were way too many hands in the money pocket and yes, that pocket
was mine. The sales rep was paid, the company was paid and the three
crews were paid.
The guy sent to do the siding part of the job was sent
by God, truly, sent by God. He told me he could've done the whole project
for a fraction of the $12,500. Through him, people he knows and consequently
people they know I could have a home build from the foundation up. Bottom
line, it's the difference between success and failure.
I have nothing against unions but union workers on my
tight budget are really not an option. No plumbing was required on my
first project but was required on the second. There was a boiler heating
system where boiled water under pressure was sent via copper pipes around
the house at the baseboard level. When the house was purchased it was
boarded and winterized. The heating pipes couldn't or weren't drained
properly. With my fingers I found 11 "blow-outs" from water
freezing (later, a total of 14 "blow-outs" were found and
fixed). It's amazing what frozen water can due under pressure. What
did I do? Well, not having a networked plumber I went to the phone book,
again. A very nice person came out for a quote and quite a quote I got.
The plumber said he wanted a two man crew, eight hours at union rate
and it was a two day project. (NOTE: get a project price quote not a
per hour quote). Again, this is too many people in the money pot. The
sales rep, the company and the union workers all needed to be paid to
the tune of $3,000. I don't know if it was anger or pure shock, but
I nearly kicked the guy out the door. The quote was so out of line that
there was no place to start negotiating - not an option, thank you and
goodbye. My network stepped up to the plate and I got the job done for
only $600!!! Big difference? You bet! There were two people on the job
and by the time I arrived after work the pipes were holding pressure.
That was the most satisfying $600 check I wrote.
To sum up:
I have two words, SHOP AROUND. Get a quote, then get another quote,
then….yes, get another quote. A few dollars, sometimes hundreds
of dollars, saved here and there, multiplied by the two hundred items
on your list can be the difference being success and failure.
Don't fall in love with the house. It's a business and
treated as such. Don't put in gold fixtures because its something you've
always wanted. Do only what's going to add value or, within reason,
cause your house to stand out and be sold before Mr. and Mrs. Jones
sells theirs down the street.
You will go over budget and you will exceed the time line set. Have
the cushion built into your figures. Have a "rainy day" fund
that if needed, you'd be able to tap. I know several houses on the market
now that were started but for whatever reason (mostly money) were never
completed. Half of them are back with a bank as another foreclosure!
You need to do your homework before placing that bid to buy and remember
it's all a number's game.
Stay on top of everything. Keep reviewing the funds, expenditures and
budget – the numbers. The Excel program was and still is, my best
friend. Make it your job to know every inch of the house and where ever
penny is or will be spent. Keeping a firm handle on the project is vital.
Carry cost and fees. DO NOT FORGET THEM. I can't stress this enough.
Buying bank owned properties is a bit different – "as-is"
means they don't pay for anything (survey, house and pest inspection).
Closing fees, cost of funds (loan origination), mortgage payments and
utilities for the months you own this place WILL run well into thousands
of dollars. Don't be upset by these figures just be sure to figure them
into the numbers on a potential house. If the numbers work, the project
stands a good chance of succeeding.
I went into my first project with the motto, "if I just break even,
the whole venture was a success". The learning process carried
value to me. If nothing else, I paid, with my time for a hands-on class.
Remember, breaking even means no money spent on the class. You then
go off to the next house filled with knowledge and all the money paid
out in the first. You see, I knew people were making a profit doing
this so if I were to break even I'd just move to the next house. Thank
God that didn't happen. I made a profit and moved to the next.
Rule 5 and reality check:
Don't quit your job to do this full time! When I started I didn't have
a lot of money and didn't want to stress the numbers with a high mortgage
payment. I had a job, credit, money and wanted to keep it that way.
With that in mind I didn't want to go much above $150,000, purchase
price. As a result, I made a lower profit. When you first start, don't
expect to retire off your first house. The numbers are all relative.
Buying a house marketable at $200,000 may profit you $20,000 and one
marketed for $600,000 could bring in several times that much, it's all
relative. Don't think you're going to make $100,000 in profit buying
a house that will only sell for $200,000.
Don't bite off more than you can chew. Start with a house that's not
all that bad looking. Maybe just a bit out dated, some cosmetic work.
A badly damaged house may be cheap and also may just be a money black
hole. Leave these houses for the future. Unless you have an expert opinion,
a very damaged house will prove to have a good deal of work and money
sitting unforeseen. Find a happy medium between damage and price. Dress
the wounded house with a bandage (or maybe one stitch under that bandage)
on your first house and move on. Starting this way results in knowledge
and a bit of money in your pocket. Don't ever feel bad about that.