Auctions

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For those of you who get into rehabs, how often do you buy properties at foreclosure auctions? I dont see alot of people here that purchase from auctions. In general, do you find most of the good deals go the route of short sales before the aucion? For those who attend auctions, what is your opinion on the availiable properties? How often are there homes with enough equity built up to make them worth while?

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I purchased 24 homes at auctions in the past 12 years. Never purchase a property at an online auction because when you win the bid the bank often rejects your bid and you may never get the title. In that case, the auction you purchased the property at normally does not return the 5% auction fee. Live auctions tend to always give you a clear title and I never has one problem. Read on the internet the bad things about online auctions.

As for live auctions, I live in the Los Angeles area and the Los Angeles County has an auction Monday through Thursday every week. Auction.com has about two live auctions every month in Norwalk California.

I learned how to look for properties every day without wasting a lot of time. SInce a very high percent of foreclosures get cancelled on auction day I don't waste time driving to look at properties until the day before the auction. I purchase only properties within 15 miles of where I live and I know the neighborhoods so well I don't even look at most homes I buy.

I developed my own software to analyze properties. My goal is to flip a home and make a minimum of $50,000 in 6 months. My spreadsheet includes calculations for every expense including $5,000 to $9,000 to evict the current resident. I include the 5% cost I pay the auction, 55% real estate commission to sell the property, closing costs, $25 to $35 per sq foot for rehab, utilities, insurance, property tax and I even deduct the 25% I pay for income tax. I pretty much always make $50,000 and when I don't have to evict a tenant, or rehab costs are less than my budget I will make around $80k.

I look at going to an auction like going to a park for a picnic. I don't have anxiety, relax and think of going to the auction as a rest period. I will read a book or just chill and when I every property I was interested is cancelled I don't consider the auctions to be a failure because auctions are only one more arm extending out that generates income.

One more very good way to get properties is to be friendly with everyone in your bank and let them know you are an investor and you are willing to pay a great referral fee. I spoke with my banker when opening an account and two weeks ago he turned me on to a person who was getting foreclosed on for a 6-unit building in San Pedro California. I paid off his loan, picked up the property for $720,000 and it is worth no less than $250k per unit = $1.5 million, or maybe even $300k per unit $1.8 million.

This is the 2nd time I purchase an apartment building just by letting people know I am looking for apartment buildings. In 2003, I purchased a 14-unit property for $825k and could have sold it the next day for $1.4 million. That was when properties were going for $100k per door.

But, my point is; to make the really big money in real estate you have to hold onto your money and wait patiently like an alligator for the big fish. You need to know the power of the numbers for multi-unit properties. Don't be stupid like the idiots in California paying $350k per door.

Do to every auction you can attend and don't get disappointed because you have to go 20 or 30 times to get one property. Just like gambling in a casino, you may lose several times and on one lucky day you win 5 or 10 times and walk away a big winner. You may not get an auction property for a year and the next year you get 6 properties and make $300k to $500k.

Be careful about listening to opinions about auctions. Good investors don't want to cook their Golden Goose!

Here is my bonus for those who don't know.

This is the very best website to find auction properties because this list contains the exact date the property is scheduled to be auctioned and I think this list is updated on-the-fly when the status changes.

The best website for everyone wanting to but foreclosures is propertyradar.com. You have to (must) watch the videos on this website to understand how powerful this website is. 

Auction.com also has a terrific list of foreclosures and their listings are very accurate.