627 Homes purchased by 1 investor!

[Karen Margrave]

http://realestate.aol.com/blog/2012/08/03/bill-mcmachen-michigan-buys-hundreds-foreclosed-properties/?icid=maing-grid7%7Cmain5%7Cdl5%7Csec3_lnk1%26pLid%3D188193

Sorry... I lost the instructions on how to do this more neatly.

[Steve Babiak]

Now that is proof of a REAL bulk REO purchase, unlike a lot of what is posted in the forum shown below:

http://www.biggerpockets.com/forums/97-bulk-reo-discussion-and-reo-dealmaking

[Karen Margrave]

I wonder how many times this scenario has played out around the country the past few years, that we never hear of because they're purchased in the names of several corporations, etc. Amazing.

[Account Closed]

Very impressive ... I'm a little jealous.. What makes me sad, however , is the pathetic comments below the article.. People calling him greedy, saying he should be in jail, saying he should just give the houses back to the ones who lost them... Is this what the majority of our country thinks?? Were screwed

[John Fedro]

Bryan I like your comment!

Good story and good post. Thanks Karen

[Jon Klaus]

Looks like we need more yacht dealers to reduce the number of distressed homes out there. Gutsy move.

[Leon Y.]

Wow. And that's why you need to have $4.72 million lying around... doesn't the banks have the right to redeem the tax liens on the properties?

[Ann Bellamy]

Bryan A., you're right, the comments are distressing. Fortunately, some of them don't think he's a scum bag. He's a smart business man.

Without profit we'd have NO economy. Just look at the failure of the USSR. Don't these people realize that the profit motive is what creates their jobs in the first place?

[Joel Owens]

Those comments by people are crazy.

They made their choices that led to losing their homes.

Whether it was for paying cable instead of the mortgage,taking a trip,going out to eat constantly,having an expensive car you can't afford etc.

There are some exceptions and real hard case stories of course but they are few and far between.

These people are just jealous of the wealth this guy has.I am surprised he wanted to be on camera.People might think he is Rich with his yacht business and want to to pay less on the vessels.

The people I know that have money keep a very low profile and like to appear like the average person.

[Geof Greeneisen]

I was at the sale. Pretty dramatic! Other bidders were really ticked. I've never heard them start the Tax Sale with "Is there anyone who wants to buy all the properties?".

I've been purchasing at Tax Sale for the past 5 years. There are no past liens on the properties offered at our yearly tax sale. There are no redemption rights (those are sheriff sales). Once I purchase at tax sale, I drive to the house, gain access and change the locks. Technically you should wait to receive the deed in the mail. If it is occupied then we go through the eviction process. You can't see inside prior to purchase.

Title companies however won't insure the title. Only one company out of California that I am aware of will insure over the Tax Sale process which cost us $1,500 per house and it takes 45 days. Once they certify the process, i.e. notices were sent and received, then any title company will insure the title.

Several properties last year had notices of demolition on them prior to sale. People bid at the sale anyhow. After winning the bid, they not only found out their property was getting demolished but they were now responsible for the bill. Ouch!

[Rob K.]

Geof Greeneisen
When you go to sell these properties, can you sell with a warranty deed? Will the title company insure that sale?

[Geof Greeneisen]

Rob K Yes, once you clear the title. PM me and I can forward the company we've used in the past. Like I said it was expensive but the only way I'm aware of getting a transferable title.

[Karen Margrave]

Geof Greeneisen You're right, that does sound strange asking if anyone wanted to buy the whole lot first. They obviously had a deal worked out beforehand, or at the very least, the buyer knew it was going to be possible, as is often the case in areas where it's still the old boys club. It seems like they'd have to give notice if they were going to do that, so that all bidders would have an equal chance to bid.

As for peoples rude comments, in a country where we now clearly have two political ideologies, large government or free enterprise, we can expect the government crowd to always be against the free enterprise side.. hopefully free enterprise will win in November!

[Eric M.]

I know Mr McMachen casually. It is a bit of a stretch to call him a yacht dealer. He owned, among other things, the local Sea Ray dealer in Macomb County for many years. I bought my first boat from him. They sold mostly 20+ footers but also the occasional 40+ footer. I personally think of yachts as 60+ feet or so, though dealers like to call smaller ones like my 37 footer yachts to sound impressive.
He was well known locally for creating the first "dockominium" which was a small apartment built over a boat dock. It didn't catch on.
I was not certain he had $5 million anymore, things have been rough in his business, but I see he has a partner.
I have also bought at tax sales. Just remember, these are properties that the banks didn't even bother to purchase cause they weren't worth it and nothing says they are houses let alone decent houses. Many of them will undoubtedly be vacant lots and old commercial buildings and other pretty worthless junk. Macomb County has some nice areas (I spent 23 years there) but it also borders Detroit at 8 mile. There are plenty of houses down there for $7500 if you guys want them...and vacant lots for essentially free.
While it might be a good deal, he will be wading through a lot of crap for years to come getting rid of them.

[Mark H.]

This was a really foolish move. Anyone who's bothered to research these things knows that you have to do due-diligence on these sales. I remember a case where someone bought a condemned dam at one of those sales - along with the liability for the homes downstream if it failed. There was another case where someone bought a tiny lot, with a 100 foot tall brick chimney on it that the city wanted torn down. Buying 600 properties doesn't mean he got 600 houses, he likely bought a large supply of unbuildable land, a lifetime supply of crack houses and perhaps 30 or 40 nice houses. But if he bought even one property that was a derelict gas station, an old dry-cleaner or industrial site, he bought himself a bill from the EPA for cleanup.

[Rob K.]

Karen M.
At the auction, they offer all of the properties first as a bulk sale. That way they can sell them all and be done with it. If nobody buys them all, then they auction them off individually. Some will sell and some won't. The county is then stuck with the ones that didn't sell and they have a second auction a few months later. There's no inside deal. It's an easy way for the county to unload everything if it sells as one sale.

[Geof Greeneisen]

Rob K So was this a good deal? Almost all of the houses were in Warren and not in bad condition. When you take into account '12 taxes are due upon acquisition ($1,500/hs). You'll have to clear title ($1,000/hs for bulk deal).

Will he turn their $4.7M into $10M as the article suggests?

[Bill Gulley]

Smart guy to appraoch with the offer. It's also called politics!

[Rob K.]

Geof Greeneisen
If I had 4.7mil laying around, I would not have done this deal. A lot of these properties were vacant lots that are hard to move. Most of the houses will be trashed. I'm not sure how many were in South Warren, but that area might as well be Detroit. The city is a nightmare to deal with too. I don't know how much real estate experience this guy has, but it looks like he really jumped in with both feet. I didn't read the whole article. I caught bits and pieces in several news stories.

You're right about having to pay a lot more taxes. Hopefully he factored that in. Not sure also how many water bills and weed cutting assessments he will be faced with. Also in Warren, they just replaced a lot of the sidewalks. That could be another $200-$800 per parcel.

We will see if he does this again next year. I don't know how that guru from last year did, but a lot of his properties are still on the market.

[Rob K.]

Just a quick update on this story:

Most of these houses have been popping up for sale. From looking at the prices, this guy is trying to get top dollar. All of the pictures I've seen are of trashed out dumps.

Today, one of my friends called and was going to look at one of these houses. I was about two miles away, so I met him there to check it out. What a dump! Nothing had been done to it. I think they just threw a lockbox on and went to the next one. The screen door was hanging off. The front window screen was laying on the porch. As soon as we opened the front door, there was a nasty smell. Trash all over the living room. Apparantly they're not going to clean it out like banks do. We could hear water spraying in the basement. We didn't go down there, but called the agent to tell her.

I didn't even look at the rest of the house. I was afraid of getting fleas on me or having to shoot some squatter that might attack.

If anyone talks to this guy, please tell him to haul the trash out of these houses. It will make them a lot easier to sell.

[Account Closed]

Rob K I'm not so sure the new owner needs to trash the houses out. Maybe that's what you and I would do with an inventory of 1 or 3 or 10 houses. (Actually, I don't always do trash outs anymore on low end props). Selling inventory is about time and money. The owner may not be looking to make them "easier to sell". Rather, he may be comparing the cost of trash outs versus holding time. He might be listing higher than what he'll get, but it's a numbers game and he may come out ahead if a certain number of the props sell closer to asking.

It would be fun to track the portfolio, because I'm guessing he'll make his money back and then some on less than half the purchases, and then everything else will be profit. But of course we are supposed to be too busy to track someone else's deals. :)

[Jeff B.]

Perhapsr he sells what he can to reach a certain profit number, then stops paying taxes on the others, they end up being foreclosed by the county and the cycle starts anew??

[Rob K.]

K. Marie Poe I agree that it might be a waste of cash to clean out every house, but this was more than your average trashout. It looked and smelled like a group of meth addicts were having underground cage fights there. I think even a seasoned investor would be afraid of getting hepatitis or cholera from touring this property.

[Rob K.]

There was an update to this story in the paper today. Thought I would share.

Macomb Daily Story

[Ramon Jenkins]

Thank You for update

[Sam Leon]

So out of 657 properties only 160 had houses? Most of those are just land parcels than.