No Possession, rehab costs, pitching to investors

[Sarah Miller]

Hello!  A lot of random questions in this post... I've searched the forums but can't find exactly what I'm after so here it goes!

1. What are some strategies you use when shopping for a foreclosure property or sheriff sale?  Do you have a formula you use? Do you mainly just rely on area/school district/neighborhood/comps to get you pointed to the ones worth digging into more?

2. How do you estimate rehab costs for said property if you do not have possession until the sale? Would a 25-30% additional minimum rehab built in "buffer" be a good start?  I plan on obviously visiting the property and doing as much publicly available research as possible (permits pulled, work done, zoning issues, etc) My purchase price will be somewhere between $50k-80k which is a considerably good foreclosure in my area and a 25-30% buffer I figure would be enough to cover major purchases if needed, plumbing, electrical work, appliances, landscaping and cosmetics.

3. I want to pitch to some private investors for the strategy of just having the money for liquidity purposes, not actually partnering on a specific property (maybe an interest only loan for 12 months).  Would it be a good idea to use an actual potential deal in my pitch to give them an idea of my work? Or is it better just to give them a general overview of my work without letting them too deep into the weeds? Is there a better strategy?

As always! Thanks!

[Michael Noto]

1. I always look where other people aren't when trying to purchase foreclosures and I have found this to be a good way to get deals for both my own investing and my clients here in Connecticut, Look for houses that may have just come on the market after being under deposit for months, listings that have just had a substantial price reduction, etc.. Another great way to find deals on REOs is to find properties that have big ticket repairs that you are comfortable with that other investors may not feel comfortable taking on. For instance, fire damaged homes, mold issues, foundation issues, etc...The bottom line is, unless you can make very attractive all cash offers with no contingencies you probably will not be to successful chasing the new hot REO that just came on the market. Have to find your competitive advantage somewhere.

2. You need to learn how to estimate rehab costs.  There is no way around this.

3. The first thing someone with private money is going to want to see is a track record. Do you have one?  If not, start building one.  There is no quick fix with raising private money, unless you have family members who are willing to bankroll you.