Purchasing my first rental home by Foreclosure Auction (Seattle)

[Adam Gangl]

Hello Everyone!

Really cool site and community. Was turned on to this place by a friend.  

I am looking to buy a home.  My ultimate goal for this property is to rent the home for 3 times the mortgage and pay it off in 5 or 6 years.  I have done my research and if I win this house for the price I believe I will then I should be able to accomplish this. 

My plan is to live in the house for as long as it takes to find the right renters.  Looking for a young family or Boeing employee as it is close by.  Mortgage will be around $800 and rent in the area averages $2500

Any advice on the auction?  I have never bought a home much less a home by auction.  I welcome all advice as it pertains to winning the property first, and/or talking to the current owner/debt holder about taking on the debt owed and skipping the Auction.  

I also welcome any advice on renting the property out and how to leverage any equity I gain in this to purchase similar properties.  I am 33 years old now and I would like to have some "Swinging Capital" by the time I am 40 and at my current job I just won't be able to accomplish my financial goals.  

Thanks everyone.  Pleasure to be part of the Community.  

-Adam

[Alex Chin]

Hey @Adam Gangl. First and foremost, welcome to the community and here's to success!

Secondly: I have never bought at auction either, but from what I know, a mortgage will not come into play here as I believe you are required to have the entire amount in cash or cashier's check at closing. If you do not have the full amount on hand, you may be able to work with a hard-money lender who will front the initial purchase and then refi with a conventional loan after you take possession.

Third: I would be very careful and run the numbers again to make sure you are able to rent a property for that amount. To be honest, I am not sure it is possible to buy a house in the Seattle area for ~$150k-$175k (assuming 20% down, 4% interest, that will approximate $800/month), let alone one that will rent for $2,500/month (might be possible by Airbnb'ing all the beds). What neighborhood are you looking at? Have you made sure that your rent comps are a solid match? Will the property require substantial renovation to get it to rentable condition? Also, if you are able to win the property, be aware that there may be an existing tenant you will have to evict.

Good luck, and feel free to reach out to the community with your questions!