Possible first deal on a flip - happening really fast

[Rick Strobel]

I don't know where to start, so I'll try to start from the beginning. :D I've been self-employed in the technology field for about 10 years. I'm reaching middle age. My plan when I struck out on my own a decade ago was to invest in real estate by doing flips in addition to my tech consulting. Well the tech business has kept me hopping and the dream of getting into real estate dragged on.

This year I've been getting serious about getting started. My rough plan is to get my license and begin really studying the market. Thought I'd chew through all the data the MLS has to offer, really study the market, look for deals, etc.

Well, the other day I wondered when I'd start seeing deals. I've owned three different houses so far, meaning I've bought and sold two of them and purchased a 3rd. They're all in the same zipcode more or less. In all that time I've never seen the kind of deals you need to be successful in this business - but I was never really looking for them.

So today I was thinking about whether it would make sense to concentrate on my old neighborhood, where I bought my first house, as a target area. Had a chance to drive through and I noticed one house that had some kind of signs on the windows. It looked vacant. At dinner I was playing with the Zillow app on my iPhone and learned that it was being auctioned by auction.com next week!

Well, I guess I'm starting to see deals :D

I'd like to pursue this. I know there's probably about a 2% chance or less that I'll actually end up buying this property. But, I think this will be a good learning experience.

What this deal has going for it:

• I know this neighborhood. I lived there for 5 years as a homeowner. The houses are cookie-cutter so I already have a pretty good feel for how to renovate one and what it might cost.
• The property values should be pretty predictable. Again, all the houses are essentially the same. Some may have a small addition or have the one-car garage converted to living space. They're all 3BR 2BA brick ranches on decent sized lots.
• I think the price and location are excellent - so much so that I bought my first house there. Neighborhood is in the nicer area of town but one of the lower price points.
• Close to where I live now.

What's wrong with this deal:

• I'm not ready yet.
• Don't have financing in place. Listing says no financing, cash only.
• Not confident that a good price can be paid given the likely public knowledge of the sale.

The first two downsides can be overcome. Sometimes opportunity doesn't always sit around waiting for you to be ready. I've been studying this business on and off for 10+ years, so maybe I'm more ready than I think. Regarding financing: I know a lot of people from my existing business, many of them may have the means to invest. I'm confident that either through them or other sources I could come up with the money needed. As they say, if you find the deal the money will find you.

Anyway, I'd like to pursue this like I'm going to try to buy it. It keeps me active and alert and re-energizes me at a time when I need it anyway. So, what the hell. This is where the real learning takes place!

Here's some info from the auction.com listing:

• All buyers who register after 5:00 AM PDT (the Saturday after the auction begins) will need to contact a bidder qualification representative for approval. They may be reached at 800-269-0361.
• Property is being offered as is, where is
• Buyer is responsible for all costs associated with purchase
• Buyer's Broker/Agent Commission available. Please contact agent for more information
• Buyer will receive a Special Warranty Deed
• Earnest Money Deposit to be 5% of Total Purchase Price or $2,500, whichever is greater
• A Buyer's Premium equal to the greater of 5% of the Winning Bid Amount or $2,500 will be added to all Winning Bid Amounts to determine the Total Purchase Price

I'll probably go by the house tomorrow and look around the outside. May also call the agent I've worked with in the past and get some comps and advice.

Probably the most important tidbit:

"Financing Information: Not Available. Cash Purchase Only."

I suppose that means I'm going to need to bring someone in on the deal who can write a check for the full amount?

Way too early to talk numbers, but I'd guess that if that house were in excellent condition it'd bring about $130,000. The house last sold in 2005 for $113,000. Borrower is in default as of 2012 for $125,000. I guess the chances of them accepting $75,000 is pretty remote. But they won't accept it if you don't offer it.

OK, thanks for reading this far :D I'd love to open up the discussion. Any and all comments welcome. Thanks!